Dividends At Stake As SFO Expects Investors To Monitor Conduct Of Portfolio Companies

On 13 January 2012, Director of the Serious Fraud Office ("SFO"), Richard Alderman gave a stark warning to shareholders and investors in companies found guilty of corruption. His announcement followed an agreement with Mabey Engineering (Holdings) Ltd to pay over £130,000, representing sums it received through share dividends derived from contracts won through unlawful behaviour by its subsidiary company, Mabey & Johnson Ltd ("M&J").

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On 13 January 2012, Director of the Serious Fraud Office ("SFO"), Richard Alderman gave a stark warning to shareholders and investors in companies found guilty of corruption. His announcement followed an agreement with Mabey Engineering (Holdings) Ltd to pay over £130,000, representing sums it received through share dividends derived from contracts won through unlawful behaviour by its subsidiary company, Mabey & Johnson Ltd ("M&J").

Background

M&J were in the business of exporting pre-fabricated bridges to developing countries. Between May 2001 and November 2002, M&J entered into an agreement with the Iraqi Government to facilitate the avoidance of UN sanctions by allowing it indirectly to access funds held in a UN controlled account. By facilitating the avoidance of the sanctions, M&J secured a contract with the Iraqi Government worth over €4.2 million. An internal investigation ensued and in 2008, M&J reported the irregularities to the SFO. Following an SFO investigation, M&J pleaded guilty to charges of corruption and breaches of the UN sanctions in September 2009 (both in respect of the Iraqi contracts and other acts of impropriety in Jamaica and Ghana). Two of M&J's former directors and a sales manager have since been convicted for related offences. As a penalty for its conduct, M&J was ordered to pay over £6.5 million in fines, costs and reparations. This sum was comprised of £3.5 million in fines, over £1.4 million in reparations, a £1.1 million confiscation order and the SFO's costs. Mabey Engineering (Holdings) Ltd, M&J's parent company, has now agreed to pay over £131,201 to the SFO, which represents dividends that it received from M&J as a result of the contracts it obtained in breach of the UN sanctions. A civil recovery order requiring the payment was approved by the High Court under Part 5 of the Proceeds of Crime Act 2002 ("POCA"). Civil recovery under Part 5 of POCA is a statutory scheme for the recovery, in civil proceedings, of...