Innospec Director Pleads Guilty In U.K.

The Serious Fraud Office said the former sales and marketing director in the U.K. for Innospec pleaded guilty this week to three criminal counts of conspiracy to corrupt.

David Turner, 56, appeared Tuesday at the Southwark Crown Court in London.

According to the SFO, he was charged with two counts of conspiring to bribe public officials in Indonesia and Iraq. The illegal payments were for sales of Innospec's gas additive products, including tetraethyl lead.

Turner also pleaded guilty, the SFO said, to conspiring to bribe Iraqi officials 'to ensure that tests on MMT, a competitor product manufactured by Ethyl Corporation, conducted by or on behalf of the Government of Iraq, concluded with an unfavourable assessment of that product.'

The alleged offenses occurred between 2002 and 2008.

The court didn't set a date for sentencing, the SFO said.

Turner, a U.K. citizen, settled civil charges with the U.S. SEC in 2010. He disgorged $40,000 and wasn't required to pay any further civil penalty.

Two other Innospec executives, Dennis Kerrison and Paul Jennings, have also been charged with criminal offenses in the U.K. Their next court appearance for a plea will be in April.

In 2010, Innospec -- a specialty chemical-maker based in Delaware -- reached a $40 million global settlement of more than a dozen criminal charges in the U.S. and U.K., including FCPA and U.N. oil for food program offenses, and violations of the U.S. trade embargo against Cuba.

Last month, Innospec's agent in Iraq, Ousama Naaman, was sentenced in the U.S. to thirty months in prison. He pleaded guilty to conspiracy and violating the Foreign Corrupt Practices Act.

No Innospec employees have faced criminal charges in the U.S.

Naaman also settled civil charges with the SEC in 2010. He agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038.

The Serious Fraud Office said it had help in Turner's prosecution from the U.S. Department of Justice, the SEC, the City of London Police, and the Cheshire Constabulary.

Thirty Months For Naaman

Innospec's former agent who pleaded guilty last year to bribing Iraqi officials and violating the U.N.'s oil for food program was sentenced today to thirty months in federal prison and fined $250,000.

Naaman, 62, a Canadian citizen, is the only individual prosecuted so far in the United States for Innospec's bribery.

The judge didn't say when he has to surrender and start serviing his prison sentence. He's now free on personal recognizance bond.

Innospec, a Delaware-based specialty-chemical maker, reached a $40 million global settlement last year of more than a dozen criminal charges in the U.S. and U.K.

The DOJ had asked that Naaman be jailed for seven and a half years. Based on his guilty plea, he could have been jailed for more than ten years. His lawyers had argued for time served based on his custody after arrest and later under home detention.

Three former Innospec executives -- Dennis Kerrison, Paul Jennings,  and David Turner -- have been charged by the U.K. Serious Fraud Office with overseas bribery. Their next hearing in London is set for January 6, 2012.

Naaman was arrested in July 2009 in Frankfurt, Germany. The Justice Department extradited him to the United States. In a superseding information, he was charged in Count One under 18 U.S.C. §371 with conspiracy to defraud the U.N. oil-for-food program and to violate both the antibribery and books and records provisions of the FCPA. In Count Two, he was charged under 15 U.S.C. §78dd-l with violating the FCPA and under 18 U.S.C. §2 as an aider and abettor.

In his guilty plea, Naaman admitted paying or promising to pay more than $3 million to officials at Iraq's Ministry of Oil and the Trade Bank of Iraq to win business for Innospec. The company makes and markets the anti-knock compound tetraethyl lead (TEL) used in leaded gasoline. Demand for TEL dropped in most Western countries after enactment of the U.S. Clean Air Act. But Innospec's management encouraged bribery to boost sales in other markets, mainly in developing countries.

In August last year, Naaman and David Turner, one of the London defendants, settled civil FCPA charges with the SEC.

Turner agreed to disgorge $40,000 to the SEC. He wasn't required to pay any civil penalty. The SEC said he provided "extensive and ongoing cooperation in the investigation." Naaman agreed to disgorge $810,076 plus prejudgment interest of $67,030, and pay a civil penalty of $438,038. The civil penalty will be reduced by $250,000 -- the amount of his criminal fine.

Six Year Sentence For First Bribery Act Case

By Eoin O'Shea

Munir Patel was a clerk at Redbridge Magistrates Court, East London. Aged 22, he was paid an annual salary of about £17,000. It doesn’t seem to have been enough.

He also took in thousands of pounds from people who didn't  want to be prosecuted for driving offences. He helped his clients to forge documents and to avoid service. Some of them escaped prosecution (at least for now) but Mr Patel did not.

He was filmed by a hidden camera and now enjoys the dubious distinction of being the first person charged under the new Bribery Act, which came into force in July this year. He was also charged with the connected (and even more serious) offence of misconduct in a public office.
 
The maximum penalty for bribery is 10 years. The maximum for misconduct in a public office is life imprisonment. In the end, Mr Patel pleaded guilty to specimen charges of each offence and was sentenced on Friday. He will have received a big discount for the guilty pleas, which led to a sentence of 3 years for the bribery and a hefty 6 years for the misconduct offence, with the sentences running concurrently. See the BBC report here.

For a young man with no prior convictions and who might have made a worthwhile career, the effect of conviction and sentence will be devastating. But it is clear that the Court wanted to send a strong signal about the corrosiveness of even apparently "petty" offences. It didn't help Mr Patel that he was an officer of the court, who held a position which, as the Judge put it, "had at its heart a duty to public confidence". In the circumstances, 3 years for the bribery is at the lower end of my expectations, despite the guilty plea. The sentence might have been higher had there been no misconduct offence with the 6 years which went with it.
 
Among lawyers, campaigners and bloggers interested in anti-bribery law there were complaints that this "minor" case was the first prosecution under the Bribery Act. The Act is a very big deal in the corporate world and some wanted the first prosecution to relate to some major international corruption scheme.  
 
But the offending in this case was hardly minor. Mr Patel seems to have been the instigator of a long-standing and sophisticated scheme from which he made a lot of money. The prosecution was brought by the UK's domestic prosecution agency, the Crown Prosecution Service (CPS). Major international corruption cases are in the bailiwick of the Serious Fraud Office (SFO) and take years to prepare. It would be perverse (and probably unconstitutional) for the CPS not to take advantage of the higher sentencing tariff under the Bribery Act just because it might steal the thunder of the SFO on some future case.    
 
The bigger cases will come along soon enough. In the meantime, this prosecution, and the attending publicity, will do a lot of good. It reminds us that bribery is not just something that happens "over there" and that it is a danger to British society as much as any other. It illustrates that the Act imposes high and consistent standards and is not mere cultural imperialism. It strengthens the rule of law at the centre of the justice system. These are results that any prosecutor can be proud of.

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Eoin O'Shea is a partner and Head of the Anti-Corruption Group at Lawrence Graham LLP. His book The Bribery Act 2010: A Practical Guide was published in June 2011 by Jordan Publishing. He can be contacted here.

Anti-Corruption Benchmarking Report As A Self-Assessment Tool

By Jeffrey M. Kaplan

U.S. enforcement officials – including the Attorney General himself – have stressed the importance of self-assessments to achieving anti-corruption compliance program efficacy. Such assessments are also an important part of anti-corruption compliance program standards issued by the UK Ministry of Justice and the OECD anti-bribery working group.  

For a variety of reasons, such assessments should – where reasonably possible – be conducted by an independent expert in anti-corruption compliance programs. But for some companies, this optimal approach may not be practical.

The report based on the anti-corruption compliance program benchmarking survey that Rebecca Walker and I conducted earlier this year with the FCPA Blog can be helpful to organizations seeking to use only internal resources to assess their compliance efforts. Specifically, companies can:

• Use the report to see what best practices relating to a wide range of anti-corruption compliance measures are.

• For areas where they do not apply a best-practices approach, ask themselves: Given the nature of my organization’s anti-corruption risks, can I persuasively explain/defend the approach that we do have.

• For areas where the answer to this question is “Yes,” document the basis for the finding.

• For areas where the answer to this question is “No,” develop and document appropriate improvement plans.

• Report on the initial process/results to senior management and the board of directors (or appropriate committee thereof), and periodically report back on a) progress in implementing improvement plans, and b) any changes to the company’s risk profile that  should impact the initial findings.

For more information about the Anti-Corruption Compliance Program Benchmarking report, please click here.

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Jeffrey M. Kaplan, a partner in the Princeton, New Jersey office of Kaplan & Walker LLP, has practiced in the compliance law field since the early 1990’s. He serves as Adjunct Professor of Business Ethics at NYU’s Stern School of Business. He can be contacted here.

Audit Analytics For Bribery Act Compliance

By Steve Biskie

While the Foreign Corrupt Practices Act has been around for decades, the newly enacted U.K. Bribery Act (July 1, 2011) enforces even more far-reaching and stricter penalties. If you’re involved in audit, finance, legal, risk management or compliance in an organization doing any business in the U.K., be it directly or via subsidiaries, agents or branches, you’re probably already under pressure to address Bribery Act compliance.

You may already know that you need to establish a Bribery Act compliance program. Maybe you’ve started monitoring Bribery Act regulations manually, and are realizing that emailing spreadsheets isn’t cutting it as a sustainable compliance program.

So, how do you become efficient and effective at addressing Bribery Act requirements? The direct answer: develop an audit analytics strategy for Bribery Act testing as an integral part of your compliance program.

A technology-enabled strategy using audit analytics is a keystone of an effective and efficient Bribery Act compliance program. It’s risky to rely on “policies” alone – companies need to actively monitor transactions to ensure compliance with policies and ensure potential issues can be quickly identified without relying on a lot of additional manual effort.

An audit analytics strategy can help assure compliance with the UK Bribery Act in the following ways:

•        Look for ‘red flags’

•        Develop an early warning system

•        Continuously monitor key internal controls

•        Create instant notification of potential problem areas

This contributes to creating a culture where employees know that their actions are being reviewed -- a proven deterrent to non-compliance.

Over time, use of audit analytics combined with a process to follow-up and resolution of red flags may itself become a control and provide evidence of having “adequate procedures” in place.

Audit analytics will allow you to perform detailed analysis of your business transaction data against red flag scenarios and enables repeatable testing -- essential steps in creating an effective compliance program.

To learn more about how to use audit analytics as part of a comprehensive UK Bribery Act compliance strategy, download the free eBook: Don’t Get Stung by the UK Bribery Act: Leveraging audit analytics for compliance testing.

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Steve Biskie, CPA, CITP, CISA, is the Director of Customer Solutions, ACL Services.