Oxford Publishing Ltd to pay almost £1.9 million as settlement after admitting unlawful conduct in its East African operations

3 Gorffennaf, 2012 | Eitemau newyddion

The Director of the Serious Fraud Office (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.

Background

OPL is a wholly owned subsidiary of Oxford University Press (OUP), which pursues its mission through five publishing divisions, including the International Division.  (See note 1 for editors). 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 well established local dictionary programmes and growing 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.

Self referral

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. (See note 3 for editors)

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 relevant features have led to the decision to pursue a civil recovery order in place of a criminal prosecution.  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 has previously been subject to 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 £2,000,000 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.

Statement of SFO Director

SFO Director David Green CB QC said;

“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.  The 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.”  

Notes for editors:

1. Oxford University Press is a department of the University with no separate legal personality of its own.  The University, and therefore OUP, operates as a charity with its principle mission being “the advancement of learning by teaching and research and its dissemination by every means”.  The University is a corporation established under common law and formally incorporated by the Oxford and Cambridge Act 1571.  It is not governed by the UK Companies Acts and does not have limited liability.  The affairs of the University are managed in the framework set out in the Oxford and Cambridge Act 1923 and the University Statutes and Regulations.  Under those Statutes the affairs of OUP are charged to a group of University academics known as “the Delegacy”.   The Delegacy is required to establish a Finance Committee to direct and manage the business, assets and finances of OUP.  The Finance Committee for OUP operates as the equivalent to a Board of Directors.  OUP is the world’s largest university press.  It has a diverse publishing programme that includes, but is not limited to, school and college textbooks, dictionaries and reference books.
2. The funds will be utilised in accordance with the Asset Recovery Incentivisation Scheme which, for cases of civil recovery, result in the SFO receiving up to 50% of the value the monies remitted to the Home Office by the Trustee.
3. The Order is made under section 276 of the Proceeds of Crime Act 2002.
4. Details of previous SFO civil settlements are available in the ‘Press room’ section of our website as follows:

   Mabey & Johnson, 13 January 2012.

   Macmillan Publishers Ltd, 22 July 2011.

   MW Kellogg Ltd, 16 February 2011.

5. Related court documentation is available with this release as follows:

Consent Order

Claim Form to the High Court of Justice, Queen’s Bench Division

Application Notice Form to the High Court of Justice, Queen’s Bench Division