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Camilla de Silva at 12th International Pharmaceutical and Medical Device Compliance Congress

10 Gorffennaf, 2018 | Areithiau

Camilla de Silva, Joint Head of Bribery and Corruption, speaking at the 12th International Pharmaceutical and Medical Device Compliance Congress in Vienna on 14 May 2018.

Thank you for inviting me here to speak today. It is a pleasure to do so at such a notable event for the pharmaceutical and medical devices sector. During the course of the day you’ve looked at current ethical and compliance issues and identified specific risks in your industry with the aim of enhancing compliance in your businesses. I’m going to change the focus for this afternoon as I have been asked to give an anti-corruption enforcement update from the UK SFO’s perspective. I will not be speaking about how to improve a compliance programme, good governance and prevention, but rather what happens when, for whatever reason, compliance fails and you find yourself in jeopardy of coming to the attention of the SFO.

Most of you here will be aware that the SFO is an investigation and prosecution agency and I will therefore be speaking from that perspective. In my update, I will be speaking about what the SFO is doing and how it might affect you including a brief outline of the use of the Bribery Act and DPAs, our future, resourcing workload and we’ll get into the detail about what the SFO is doing in a moment, but before I do, let’s look at why I’m here.

Corruption in pharma

One important reason why I am speaking here today is, as many of you will appreciate, that pharmaceuticals have been identified as particularly prone within the health sector to corruption. The NGO, Transparency International, published a paper in June 2016 which reported that over $300 billion of annual global health expenditure is lost to corruption and errors.

The 2016 paper makes the case that tackling corruption is “crucial for ensuring human and economic development”. Corruption negatively impacts health services and outcomes, the paper reads. Embezzlement of public health budgets and kickbacks in the procurement process can result in the overpayment of goods and services. Corruption undermines public trust in governments and public services. It has a negative impact on morbidity rates, infant and child mortality, and health spending; it can have life-and-death consequences.

If this wasn’t persuasive enough, there are of course good commercial arguments against being complacent about corruption risks. A self-aware, corporately and ethically responsible business is one that commands the confidence of supply chain partners, credit agencies, investors, creditors and customers. It is a corporate which is able to pursue its commercial interests competitively undistracted by self-limiting inhibitive behaviour.

I think the very existence of a conference like this, on this scale and this well attended, shows that those of us in the room are on the same page in terms of appreciating the inherent risk in the pharmaceutical industry.

However, most concerning in this 2016 report, is the assertion that “Many actors in the pharmaceutical sector do not display a genuine commitment to anti-corruption efforts.” This is said to be “amplified by the undue influence that companies are capable of placing on governments.” I don’t know if that is an analysis you recognise, but perhaps it indicates there is a way to go to eradicate complacency in the sector. I hope that the “many actors” in the industry, have changed or are rapidly changing their approach and attitude. The importance of this conference is underlined if it helps with that effort. Certainly, the SFO would expect a zero-tolerance of corruption – and positive policies to that effect – accompanied by a genuine commitment on the part of pharmaceutical companies to effect that goal.

What the SFO is doing:

Many of our cases concern blue chip UK companies and these companies are capable of placing undue influence on politicians and in the City, but that is what the SFO is for, to show visible and demonstrable independence in the investigation and prosecution of major economic crime involving, even our flagship enterprises. We have a single clear goal, to investigate and if appropriate, prosecute top end financial crime firmly and fairly regardless of where that evidence takes us. The decision whether to take on a case is by statute that of our Director’s alone. The type of cases which the SFO takes on are often nationally, internationally and strategically significant companies. This is crucial to judicial confidence, to business confidence and to public confidence. We have the stamina and resources to take on these most demanding of cases and a selection of our publicly known current case-load demonstrates that independence and appetite, for example GSK, Alstom, Tesco, Barclays, Libor, Euribor, Rolls-Royce, Airbus, Unaoil, Petrofac, Rio Tinto.

Bribery Act:

Part of our mission at the SFO is to confront corruption and I’ll touch briefly on the background to the legal landscape in England to explain. We are a UK office based on the corner of Trafalgar Square, Central London, but with a global reach. The UK Bribery Act, which came into force in July 2011, has extra-territorial application. It extends to UK companies operating overseas and overseas companies carrying on business in the UK. We run cases involving conduct all over the globe, going wherever the investigation requires us to and working with international partners to secure evidence for use in prosecutions.   The purpose behind the Bribery Act was to give the UK power to tackle global corruption. The guidance to the legislation notes the UK was enshrining in law its desire “to play a leading role in stamping out corruption and supporting trade-led international development” in order to create a “level playing field, helping to align trading nations around decent standards”. The B.A. creates a strict liability offence of failing to prevent bribery by a commercial organisation, with the onus on companies to have good compliance to prevent bribery.

Ultimately it will be for the courts to decide whether an economic crime has been committed and whether a company’s compliance programme is adequate enough to form a defence under the Bribery Act. However, since the passing of this Act, we, the SFO, have yet to encounter a corporate with sufficient confidence in its compliance programme to persuade us of its adequacy, or run a section 7 defence argument in court. In the one case brought by the Crown Prosecution Service where such a defence was run at trial, the jury rejected it.

In order to bring a charge a prosecutor has to be satisfied that there is sufficient evidence to form a realistic prospect of conviction; and determine whether a prosecution is required in the public interest. Part of that evidential consideration requires an analysis of the defences a suspect might raise, including in a section 7 allegation, the adequate procedures defence. So we will take steps to investigate a corporate’s procedures, but also enquire beyond that to review implementation. This enquiry is not only to assess a potential defence but where satisfied that there was not, to highlight to the court, the extent of the failings which may be relevant to sentencing and the culpability of the corporate. A corporate that has made genuine attempts to prevent bribery will be viewed more positively than one that has not.

DPAs:

And such considerations are relevant to whether we would invite a corporate into a Deferred Prosecution Agreement (“DPA”) negotiation. Just pausing there, to remind you, a DPA provides a mechanism whereby, subject to the approval of the court, prosecution can be avoided by entering into an agreement on negotiated terms.

So, a corporate approaching the SFO will, as part of its cooperation, need to address past inadequacies by taking steps to remediate – including overhauling its compliance and removing Board members in post during the conduct. This would be a positive consideration in weighing up whether or not to offer a DPA as an option to resolve. We will look at the DPA Code of Practice and whether the corporate Board is committed to resolving the issues and changing corporate culture. Ideally remediation takes place during the investigative period, but where that is not complete, but going in the right direction, a term of the DPA can address this.

Our stance on DPAs reflects the paramount importance identified in the Code of Practice of co-operation. If a corporate adopts a course of full cooperation then it can expect to have the real benefit of being able to better control its risk in a number of significant ways. Thats is not to say the terms of a DPA are a commercial litigation exercise, the SFO approaches the negotiation with integrity and intellectual rigour, mindful that we will need to explain our methodology and decision-making to a judge in open court.

But that principled approach does not mean that there can be no commercial advantage of a DPA to you. The benefits of DPAs are clear, especially in terms of business and reputational risk but also in a number of other ways, including at the sentencing stage. This is particularly so where the DPA process has seen an extension of the discounting of the penalty for cooperation by 50%. This could be the difference of 100s of millions of pounds between cooperation and discovery. The development of our intelligence capability means that the chances of an errant company being caught have increased steadily. Ethically moribund risks thought to be commercially sound previously are now high risk.

Don’t just take it from me, but take it from Lord Justice Leveson and the concluding remarks of his Rolls – Royce judgement,

“A cynic, (or irresponsible company) might look at the costs which Rolls-Royce have incurred in their own investigation and wonder whether it be more sensible to keep quiet and hope that its conduct does not fall under the eye of the authorities. Quite apart from the total failure to acknowledge the difference between right and wrong, that is to fail to understand that such an approach carries with it cataclysmic risks. Whatever the costs Rolls-Royce have incurred, they are modest compared to the cost of seeking to brazen out an investigation which commences; absent self-disclosure and full co-operation, prosecution would require the attention of the company to be entirely focused on litigation at the expense of whatever business it is trying to conduct and conviction would almost inevitably spell a far greater disaster than has befallen Rolls-Royce.”

Engaging with us doesn’t necessarily mean a criminal sanction at all. If the evidence isn’t there, we will not be prosecuting you or considering a DPA or enforcing any other sanction. That is a valid outcome and one we are comfortable with. If you are proactive and come to us early, we can work together to understand what has happened and it could well be the case that having done so, there is no further action. You are not committing yourselves to an inevitable enforcement action, but you are giving yourselves the valuable opportunity of a mitigated outcome if you could have a criminal risk to be resolved.

The SFO and the future:

So, I’m sure you’re asking will the approach to DPAs – and our work more generally – change under new leadership. As you will know, although the search for a new Director has been successful, the individual cannot take up the post immediately. Mark Thompson, previously our Chief Operating Officer has been appointed by the Attorney’s Office as interim Director. Mark has made it clear that he will very much maintain business as usual at the SFO and continue the mandate set by the previous Director. We remain committed to our mission, the terms of which I’ve explained today.

On 6 April 2018 the SFO celebrated its 30-year anniversary. When the SFO was created, one could scarcely have imagined how the business landscape would change in that time. The proliferation of digital communications, cloud-based information management and the increased complexity of corporate structures has required the SFO to exercise its powers under Criminal Justice Act 1987 dynamically, as expected under the ‘Roskill’, our multidisciplinary model. The CJA 1987 is clearly capable of adapting to the investigative landscape of serious economic crime in 2018. In our pursuit of investigating and prosecuting the top tier of fraud, bribery and corruption in the modern context of multinational business, we at the SFO need to use the full scope of our powers.

Contained within section 2 of the CJA 1987 are a number of powers that we regularly deploy in investigating our cases, as it is the statute that gives us the power to compel the production of documents from people and the power to compel people to answer questions.  There are of course limits to these powers, we cannot compel the production of documents which are subject to Legal Professional Privilege (LPP) and aren’t interested in doing so, where that claim is well founded.   

Recent cases have highlighted that the SFO will challenge overly ambitious claims to privilege and, in specific circumstances, are obliged to do so. For example, the SFO successfully challenged claims to legal advice and litigation privilege in declaratory relief proceedings against a corporate we are investigating, ENRC. This case is subject to appeal (to be heard in July), but the law as it stands today is clear. This case, and those subsequently decided – RBS v Bilta and HSE v Jukes – demonstrate that UK courts look for the actual evidence of a lawyer-client relationship for the purposes of legal advice privilege, and for the actual moment where the dominant purpose of relevant communications is in anticipation of adversarial litigation for litigation privilege.  The protection of privilege has not disappeared or been eroded as has been reported by some commentators. Whether or not privilege applies will depend on the facts of the case.

The innovative exercise of our powers will, on occasions, be tested by way of judicial review. We would be getting it wrong if we were not, on occasions, challenged and we appreciate that a judicial review can clarify the law and the extent of our powers. In the last 6 years we have faced judicial review on a wide-range of topics, from criticism of our procedures for handling LPP, legal representation in interview and the circumstances in which a court might require us to close an investigation. We were successful in defending each of these challenges. We are currently awaiting the outcome of a judicial review on the scope of our section 2 CJA powers to compel the production of documents held overseas, which will bring clarity to this issue.

For those of you who follow the UK landscape closely, you will have noticed the recent announcement about our funding. Also as of last month, we have a revised resourcing model to do our work. We are the beneficiaries of a change to our funding arrangements as announced by HM Treasury. The changes are cost neutral, but increase our core-funding for 2018-19 from £34.3 million to £52.7 million, with leave to apply for additional blockbuster funding from the reserve in limited circumstances. This consolidation of our funding will enable us to build future SFO capacity. We will be able to plan our resourcing better to fit our busy workload, which will by design include large-scale investigations, which previously came under the banner of blockbuster cases, such as the Libor investigations.   We think this is good news because it provides us with certainty, stability and enables us to build on the foundations laid down under our previous Director.

What of the workload? We are busy – we have no shortage of work coming through our door. That work comes from a number of sources, including increasingly, from responsible corporates coming to speak to us, acting on a self report. I’m often asked about the trends in our work. From where I sit, we’re increasingly seeing organisations where there has been a change to the Board, or an acquisition, taking a look at historic conduct overseen by different Board members and coming to report that to us. Organisations and more importantly, individual Board members, are deciding that they want to satisfy themselves that predecessors have not made risky decisions that are yet to be uncovered and are doing something about those concerns, for fear of the consequence to their business and themselves of continuing to sit on that knowledge. In my view, that makes sense, as playing the casino approach to corporate conduct is becoming increasingly risky. The chances we’ll find out, are ever-increasing.

There have also been, and are continuing developments in our intelligence capabilities. We access intelligence sharing initiatives, such as the SARS regime and JIMLIT, where the private sector can and does voluntarily share information with us and the National Crime Agency who lead on it, and from there we are developing casework. And we are generating work ourselves, through the use of individuals who come to us, willing to stand up and do the right thing against those who won’t, disgruntled competitors and other forms of intelligence, foreign and domestic. I think we will see in the future even better sharing of intelligence and evidence, as the impact of the UK Government’s economic crime reforms is felt.

The prevailing mood across society, not just civil society, at the moment is one of transparency and activism, I would suggest. That might mean for a corporate the first they know of our interest is when we turn up unannounced at a personal or business premises at dawn to conduct a search – and this could be in the UK or overseas, and then you have a company with a major investigation hanging over it, with all the uncertainty and expense that entails.

To avoid that, you can take the alternative stance, of confronting corruption and beginning a dialogue with us, as I’ve discussed. So, my message is keep doing the good work on prevention of corruption in your sector, but where prevention fails, think hard about the benefits of coming to see us and coming to see us with genuine cooperation.