January 17, 2017
As the New Year ushers in its perennial resolutions and new leaves are turned over left and right, the close of 2016 saw the UK’s Serious Fraud Office confirm that its investigation into Soma Oil & Gas Holdings Ltd had not borne fruit. In announcing the closure of its 17-month-long investigation into allegations of corruption in Somalia, the enforcement agency cited “insufficient evidence to provide a realistic prospect of conviction.” This announcement may nevertheless be a thorn in the side of companies subject to investigation—as well as any entity doing business with them—thanks to its barbed observation that, notwithstanding the declination, “there were reasonable grounds to suspect the commission of offences involving corruption.” What might such an announcement presage in the minds of the company’s business partners?
On one view, the forest is clearly visible amongst the trees. The SFO, like all prosecutors for the Crown, has a clear mandate only to bring cases having a realistic prospect of conviction. The evidence unearthed by the investigation must indicate, firstly, that the corruption was more likely than not to have occurred and, secondly, that pursuing the defendants to trial is in the public interest. Once the case is before a jury, a higher standard of proof applies: guilt beyond reasonable doubt. In light of this mandate, the evidence available in the Soma case—providing only “reasonable grounds” for believing corruption had occurred—falls short of the requirements to launch a prosecution. The SFO was duty-bound to nip the investigation in the bud.
Of course, companies doing business with Soma (or with any of the other companies investigated in the case) are on a different playing field than the SFO. They are concerned not with what might weather the cold light of the courtroom, but with mitigating red flags, embedding transparency in business transactions and avoiding having themselves raked over the coals of costly investigations. This last consideration is especially significant under UK law, which allows companies to be pursued even for failing to prevent corruption. In this context, the SFO’s announcement bristles with ambiguity and its declination—by whatever name—does not smell so sweet.
The very presence of a formal investigation may properly be deemed a red flag for current and future business partners of the investigated companies. The same is true of any credible suggestion of corruption. To that extent, the companies’ reputations have indeed been dragged through the mud, and there is fertile ground for questioning by business partners to assess their future trustworthiness. At the same time, companies should not be led down the garden path by the fact of an investigation that ultimately led nowhere. Companies are generally ill-tooled to dig into evidence already sifted through during the investigation and must take some comfort in the SFO’s ultimate decision not to bring a case.
As every gardener knows, the rosiest outcomes are achieved by carefully selecting the most promising seedlings and tirelessly weeding out potential threats to the crop’s growth. In short, you reap what you sow.
FOR MORE ON THIS TOPIC, PLEASE SEE THE FOLLOWING RESOURCES:
Click here to subscribe to TRACE Trends: A Compliance Conversation and receive email notifications as new posts are published.