A publisher has had to pay nearly £1.9m after admitting corruption to gain contracts in Africa, the Serious Fraud Office (SFO) reports. The SFO has taken action in the High Court, which has resulted in an Order that Oxford Publishing Limited (OPL) pay £1,895,435 in recognition of sums it received which were generated through unlawful conduct related to subsidiaries incorporated in Tanzania and Kenya.
Statement
SFO Director David Green CB QC said after the case: “This settlement demonstrates that there are, in appropriate cases, clear and sensible solutions available to those who self report issues of this kind to the authorities. he use of Civil Recovery powers has been exercised in accordance with the Attorney General’s guidelines. The company will be adopting new business practices to prevent a recurrence of these issues and these new procedures will be subject to an extensive and detailed review.”
Background
OPL is a wholly owned subsidiary of Oxford University Press (OUP), which pursues its mission through five publishing divisions, including the International Division. The International Division has ten overseas publishing entities with a head office in Oxford. Oxford University Press East Africa (OUPEA) is based in Kenya but covers a geographical region which includes Kenya, Burundi, Malawi, Rwanda, Sudan and Uganda. Oxford University Press Tanzania (OUPT) is based in mainland Tanzania but also has responsibility for the semi-autonomous Zanzibar archipelago. Both OUPT and OUPEA are wholly owned subsidiaries of OPL and part of the International Division of OUP.
The business of all the International Division entities is focused on the school text book market but most entities also have local dictionary programmes and higher education lists. The business activities include participating in public tenders for contracts to supply governments with text books and other educational materials for the school curricula. These tenders may lead to contracts which are supported or funded by the World Bank Group which is the collective title for the International Bank for Reconstruction and Development and the International Development Association.
In 2011, OUP became aware of the possibility of irregular tendering practices involving its education business in East Africa. OUP acted immediately to investigate the matter, instructing independent lawyers and forensic accountants to undertake a detailed investigation.
As a result of the investigation, in November 2011 OUP voluntarily reported certain concerns in relation to contracts arising from a number of tenders which its Kenyan and Tanzanian subsidiaries, OUPEA and OUPT, entered into between the years 2007 and 2010. The SFO required OUP to follow a procedure based on the guidance contained within its published protocol document – “The Serious Fraud Office’s Approach to Dealing with Overseas Corruption”.
Because two of the tenders were funded by the World Bank, OUP also voluntarily reported on a potential breach of the World Bank’s Procurement Guidelines to the World Bank.
The SFO remit was broader in its scope than the World Bank investigation in that it required investigation of all public tender contracts whether or not funded by the World Bank. The costs of the investigation were met by OUP.
The investigation was thorough – involving numerous interviews and an extensive review of documents and electronic data – and completed to the satisfaction of the SFO. The substantial product of those investigations was presented to the SFO and, in a separate presentation, to the World Bank. The product of that work led the SFO and the World Bank to believe that OUPEA and OUPT had offered and made payments, directly and through agents, intended to induce the recipients to award competitive tenders and/or publishing contracts for schoolbooks to OUPEA and OUPT.
Civil Recovery Order
As wholly owned subsidiaries, OUPEA and OUPT pay dividends and certain fees to OPL. Accordingly, OPL has and would receive revenue that had been derived from unlawful conduct; namely bribery and/or corruption. Following an accounting examination of the benefit obtained from the affected contracts, the SFO was in a position to determine the appropriate amount to be recovered. The approach to costs was conservative, with the result that the agreed methodology produced a higher figure than would normally be recognised as trading surplus in the accounts. No allowance has been made for the payments which are considered bribes or inducements.
The value of the Order made by the High Court is £1,895,435 (see note 2 for editors). OPL will also pay the SFO costs of pursuing the order which amount to £12,500.
Compliance procedures
Since the occurrence of the conduct that is the subject matter of the civil recovery order, OUP has introduced enhanced compliance procedures intended to significantly reduce the risk of recurrence of such conduct within OUP. These procedures will be subject to review by a monitor who will report to the Director of the SFO within twelve months, with additional and separate reporting to the World Bank. The monitor must meet strict criteria including clear independence from OUP.
Reasons for civil recovery order
A number of features have led to the decision to pursue a civil recovery order in place of a criminal prosecution, according to the SFO. They include the following:
a) The test under the Code for Crown Prosecutors in relation to the case meeting the criteria to prosecute has not been met at this point and there is no likelihood that such a standard would be met in the future. This view is based on a number of factors including, but not limited to, (i) key material obtained through the investigation is not in an evidentially admissible format for a criminal prosecution and (ii) witnesses in any such prosecution would be in overseas jurisdictions and are considered unlikely to assist or co-operate with a criminal investigation in the UK.
b) Difficulties in relation to obtaining evidence from the jurisdictions involved and potential risks to the personal welfare of affected persons.
c) OUP has conducted itself in a manner which fully meets the criteria set out in the SFO guidance on self reporting matters of overseas corruption.
d) There is no evidence of board level (or the equivalent) knowledge or connivance within OUP in relation to the business practices which led to the case being referred to the SFO.
e) The products supplied were of a good standard and provided at ‘open market’ values. This means that the jurisdictions involved have not been victims as a result of overpaying for the goods or as a result being supplied goods which were unsuitable or not required.
f) The resources needed to facilitate an investigation into this matter are considerable e.g. 12 terabytes of data collected as part of the investigation, and a civil recovery disposal allows a better strategic deployment of resources to other investigations which have a higher probability of leading to a criminal prosecution.
g) The settlement terms ensure all gross profit from any tainted contract will be disgorged.
h) OUPEA and OUPT will be subject to parallel World Bank procedures which will result in them being debarred from participating in future World Bank funded tenders for a number of years.
The SFO says that it has had criticism in relation to the transparency of the processes and proceedings in civil recovery matters. As a result the Consent Order and Claim (which sets out the basis for the proceedings) have been made public.
In addition to the property recovered under the civil recovery order, OUP unilaterally offered to contribute £2m to not-for-profit organisations for teacher training and other educational purposes in sub-Saharan Africa. This was a reflection of the seriousness with which OUP views the course of events that were subject to the investigation and a wish to acknowledge that the conduct of OUPEA and OUPT fell short of that expected within its wider organisation. The contribution would benefit the people within the affected region and be consistent with the overall mission of OUP. The offer also confirmed that the funds would not be used so as to provide OUP with a commercial advantage
Although the benefits to the people of the affected region are acknowledged by the SFO, the SFO decided that the offer should not be included in the terms of the court order as the SFO considers it is not its function to become involved in voluntary payments of this kind. However, the SFO welcomes OUP’s commitment to make this contribution and to work with a range of not-for-profit organisations in sub-Saharan Africa to achieve the above objectives.
