On 13 January 2012, the Serious Fraud Office published a press release highlighting the successful conclusion of an action brought by it in the High Court. The court ordered a parent company which had received dividends from its subsidiary to repay those dividends as the profits underpinning them derived from unlawful business conduct.
The court action concerned a bridge manufacturing company which had won contracts in Iraq as a result of corrupt practices and breach of UN sanctions. The company had been working with the SFO since 2008 when it discovered and reported the irregularities, and co-operated in full with the SFO investigations. The court order resulted in the parent company having to repay £131,201 under Part 5 of the Proceeds of Crime Act 2002, even though the parent company had no knowledge of the corrupt practices.
Two key messages emphasized by the SFO in its press release are:
- Shareholders who receive the proceeds of crime can expect civil action against them to recover the money.
- Shareholders and investors in companies are expected to satisfy themselves that the business practices of the companies in which they invest are not corrupt. A higher standard of care is expected of institutional investors as they should have the knowledge and expertise to carry out due diligence.
For a copy of the press release, please click here to visit the Serious Fraud office website.