U.K. Fraud Office in Too Many Secret Settlements, OECD Says

Britain’s Serious Fraud Office, which prosecutes corporate bribery, uses too may secret settlements in foreign corruption cases, the Organization for Economic Cooperation and Development said.

The SFO is using more so-called civil-recovery orders that require less oversight from courts and aren’t as transparent as criminal plea agreements, the Paris-based think tank said in a report today.

“The low level of information on settlements made publicly available by U.K. authorities often does not permit a proper assessment of whether the sanctions imposed are effective, proportionate and dissuasive,” the OECD said in a summary of the 79-page report.

The study praised Britain’s anti-corruption law, which took effect in July and is one of the strictest in the world. Under the Bribery Act, companies must prove they have adequate controls to prevent corruption in order to defend themselves if a bribe is paid on their behalf anywhere in the world, even if company officials didn’t know.

The SFO “hopes” to make improvements that will result in settlements being more transparent, SFO Director Richard Alderman said in an e-mailed statement today.

“Confidentiality has often been the key that unlocks resistance,” said Alderman, who is stepping down next month. “If settlements could be more open, the public would have more confidence in the process leading to them.”

DePuy International Settlement

A civil-recovery order was used in April 2011 to win a payment of 4.8 million pounds ($7.68 million) from Johnson & Johnson’s British subsidiary, DePuy International, in an overseas bribery case.

The orders are “symptomatic” of the SFO’s bid for shorter and faster cases under civil law, even though it’s supposed to prosecute criminal cases, said Mark Spragg, a fraud lawyer at Keystone Law in London.

“If the SFO can use the civil law to inflict a blow at a much lower cost it will do so, but unfortunately the scrutiny applied is far less than in a criminal case,” Spragg said in an e-mail. “The intention is to use less resources, but this should not be at the expense of fairness.”

Britain has been too slow to extend anti-bribery rules to its overseas territories, some of which are considered offshore financial havens that “may be used facilitate corrupt transactions,” the OECD said.

The U.K. also needs to clarify what is considered “reasonable and proportionate” hospitality and promotional expenses in relation to the new bribery law, the OECD said.

Alderman, the director since 2008, will be replaced next month by David Green, a lawyer who was formerly the director of the Crown Prosecution Service’s fraud group.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE