Allens

International Business Obligations

Focus: Learning from the Securency bribery prosecutions

4 September 2012

In brief: The former CFO and company secretary of Securency International Pty Ltd was sentenced recently after entering a plea of guilty to a charge of false accounting. This is the first conviction secured in the long-running investigation into Securency and Note Printing Australia and is the first tangible example of Australia's anti-corruption regime at work. Partner Ross Drinnan (view CV), Senior Associates Stephanie Wee and Tom Randall, and Lawyer Roslyn Stein report on the case.

How does it affect you?

  • As recent press coverage has shown, prosecutions under the foreign bribery offences attract significant media attention and public scrutiny. In recent times, there has been significant media scrutiny regarding when the Reserve Bank Australia (the RBA) was first made aware of the corruption allegations.
  • The conviction in this case for the offence of falsifying accounts is a reminder that individuals and companies are exposed to a broad range of criminal and civil sanctions, in addition to the foreign bribery offences, such as breaches of duties imposed on directors and officers.
  • Comments made in the sentencing judgment regarding the 'corporate culture' of Securency serves also as a reminder of a company's exposure to the foreign bribery provisions under the 'corporate criminal responsibility' test. Australian companies should ensure that appropriate anti-corruption due diligence, training and compliance programs are in place for employees operating in high-risk jurisdictions, especially where the use of in-country agents is common.

Background

In or around July 2011, the Commonwealth Director of Public Prosecutions (DPP) laid the first foreign bribery charges under Australian law against two companies, Securency and Note Printing Australia Limited (NPA), as well as eight individuals associated with the companies. Securency is partly owned by the RBA and NPA is a wholly owned subsidiary of the RBA. It is alleged that millions of dollars in bribes were offered to government officials through in-country agents in Indonesia, Vietnam and Malaysia in order to secure bank-note supply contracts.

Securency and NPA were each charged with contravening the foreign bribery provisions in the Criminal Code Act 1995 (Cth) (the Code) on the basis that senior managers acted as the 'mind and will' of the companies, and that the companies received a benefit in the form of contracts to print bank notes.1 Each charge against the companies carries a maximum fine of $330,000. Court orders have prevented the reporting of the progress of the prosecution of Securency and NPA.

The individuals were charged with offences of conspiring to offer bribes to foreign officials in order to obtain a benefit, in contravention of sections 11.5 and 70.2 of the Code. The charges against the individuals each carry a maximum penalty of 10 years' imprisonment and/or a fine of up to $66,000. Several of those same individuals were also charged with falsifying documents made or required for an accounting purpose under s83(1)(a) of the Crimes Act 1958 (Vic).

The penalties for contravening the foreign bribery offences under the Code were significantly increased in 2010. The penalty for individuals is still a maximum of 10 years' imprisonment; however, the maximum fine has increased to $1.1 million for each offence (compared to the previous $66,000). Notably, corporations are now liable for fines that are the greater of either $11 million, three times the value of the benefit obtained, or, if the value of the benefit can not be determined, up to 10 per cent of the annual turnover of the corporation during the 12 months preceding the offence. As the alleged conduct occurred between 1999-2005, the charges in the Securency matter attract the lower penalties under the pre-2010 regime.

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First sentencing decision

One of the individuals charged, David Ellery, pleaded guilty to falsifying documents under s83(a)(a) Crimes Act and was sentenced to six months imprisonment (suspended for a period of two years). The sentencing judgment is notable for two reasons:

  • Mr Ellery was not regarded as having been part of the 'inner sanctum' of an alleged conspiracy to pay the bribe to a foreign agent. However, as part of an early plea agreement, Mr Ellery pleaded guilty to falsifying records pertaining to the payment of a $79,502 debit note issued by the agent which he knew was false. It is open to the DPP to pursue additional or alternative charges to the foreign bribery offences under the Code. In addition to state criminal legislation, the Corporations Act 2001 (Cth) imposes criminal and civil liability in certain circumstances for acts or omissions that are dishonest, are not in the best interests of the company, or that involve the provision of false or misleading information.
  • The sentencing judge remarked that there was a corporate culture of 'secrecy ... and a denial of responsibility for wrongdoing' at Securency, and referred to Mr Ellery's sworn evidence of this, his undertaking to provide further evidence, and his value as an important prosecution witness in future committal hearings or trials. Those remarks are noteworthy and serve as a reminder that corporations can be 'fixed' with the knowledge of its officers if it is proven that a 'corporate culture' existed that encouraged, tolerated or led to non-compliance with the prohibition of foreign bribery.2

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Conclusion

The Securency prosecutions signal the first wave of prosecutions under the Australian foreign bribery laws. Foreign prosecutors, media entities and the business community will be monitoring the proceedings as they unfold, for guidance on the application of the foreign bribery provisions of the Code to the liability of individuals and corporations and the approach of prosecution authorities in these matters.

More broadly, the Securency proceedings serve as an example of Australian authorities working with overseas law enforcement agencies to bring charges against individuals and companies in multiple jurisdictions. The AFP's investigations have involved cooperation with Malaysian, Indonesian and British law enforcement agencies. Malaysian authorities have charged several individuals and the Serious Fraud Office in the UK has laid charges against five individuals under similar provisions in the UK Bribery Act.

Footnotes
  1. AFP Media Release, 'Foreign bribery charges laid in Australia', 1 July 2011.
  2. See section 12.3 of the Code.

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