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[The below questions were submitted by Mike Koehler, Assistant Professor of Business

Law – Butler University (USA), to Richard Alderman, Director – Serious Fraud Office, on
February 23, 2011. Professor Koehler intends to publish the answers on his FCPA
Professor site and otherwise use the answers as the basis for additional academic
scholarship on bribery and corruption issues]

Q1 In the BAE matter, the SFO stated in its “Grounds for Contesting the Claim”
of the Campaign Against Arms Trade and Corner House Research (entities
which sought to challenge the SFO’s plea agreement with BAE) that “a
serious evidential difficult had been identified in respect of potential
corruption charges, namely the difficulty of proving the involvement of a
‘controlling mind’ in the offending.” You also raised this issue in your June
2010 speech when you noted that under existing law what is needed to
establish corporate criminal liability is that a “directing mind of the
corporate was involved in the corruption.” This suggests that the lack of
bribery charges against BAE was the result of a legal deficiency. Yet in the
“Black Money” documentary, Helen Garlick, a former SFO prosecutor,
answered “yes” to the following question - “you had evidence already that
there were crimes that had been committed?” This suggests that the lack
of bribery charges against BAE was not the result of a legal deficiency, but
rather the lack of political will as described by former SFO Director Robert
Wardle in the same documentary when he used the term “blackmail” in
describing the factors which ultimately caused him to discontinue his
investigation of BAE. The statements by you and the current SFO as to
legal deficiencies in prosecuting BAE for a bribery offense are materially
different than the prior statements of SFO officials, how does the public
reconcile such materially different statements?

A1 We need to distinguish between the different parts of the investigation

concerning BAe. Robert Wardle and Helen Garlick were referring to the
investigation concerning Saudi Arabia. This investigation was over by the time
that I arrived in the SFO in April 2008. The investigation, when I arrived,
concerned Central and Eastern Europe, Tanzania and South Africa. I agreed
that that investigation should continue. There were also investigations by the US
authorities together with other authorities.

There came a time when BAe agreed to plead guilty to offences brought by the
US Department of Justice. That plea of guilty had consequences so far as the
SFO’s investigation was concerned. This was because BAe pleaded guilty in the
US to offences relating to Central and Eastern Europe. Under the UK law of
double jeopardy, it was no longer possible for the SFO investigation relating to
Central and Eastern Europe to continue once BAe had pleaded guilty to offences
relating to those countries in the US. In this respect, the law on double jeopardy
differs as between the US and the UK. Consequently, the SFO needed to
terminate the investigations relating to Central and Eastern Europe once the plea
of guilty was entered in the US.

This left the SFO investigation relating to Tanzania and South Africa. It seemed
to me that after six years of investigation it was in the public interest to reach a
global settlement. The SFO had evidence relating to an offence in Tanzania.
This offence did not involve corruption. BAe has never admitted corruption
whether in the UK or the US. BAe agreed to plead guilty to an offence relating to
inaccurate books and records concerning Tanzania. The offence was that the
books and records were inaccurate and that it was highly likely that payments
could be made in Tanzania to secure a business advantage to BAe in that
country. On the evidence available to the SFO, the SFO could not bring a
charge of corruption in relation to BAe concerning Tanzania. The Judge
accepted this during the course of the hearing.

I also had to consider the position of the investigation relating to South Africa.
Our investigation there had not significantly advanced and it was by no means
clear that we would be able to bring any charges relating to South Africa. It
seemed to me that, after six years of investigation, it was time to reach a global
settlement and to resolve those issues where we could bring the charge before
the Court.

Q2 In a February 2010 Financial Times article, you are quoted in connection

with the BAE matter as saying that any suggestion that BAE “got off
lightly” ignores “London’s contribution in enabling the U.S. to impose a
$400 million fine” and that the DOJ “would not have achieved what they
achieved without [the SFO] and [the SFO] would not have achieved what
[the SFO] achieved with [the DOJ].” What did the DOJ and SFO actually
achieve in the BAE matter? In other words, what is achieved when a
company resolves a case involving allegations of worldwide bribery, per
the DOJ’s own allegations, without being charged with a bribery offense?

A2 The first question is whether there was evidence to support a charge of

corruption. It was not necessary for us to take a view on this concerning Central
and Eastern Europe once the double jeopardy point made any further
investigation and prosecution impossible. So far as Tanzania was concerned,
the Judge accepted that we did not have enough to prove corruption.

What seems to me to have been achieved by the long running investigation and
the settlement is a very major change in the business practices of BAe. The
commitment of the group to the conclusions of the Woolf Committee were very
significant and the public look to BAe to show that they are complying with those
recommendations. BAe has also spent considerable time in revising its business
practices in order to ensure that they meet modern standards now.

I would also point to the ex gratia payment that BAe will make to the benefit of
the people of Tanzania. This payment is $47.7 million. This is very significant.
The SFO always places great stress on ensuring that the victims of crime are
compensated. The people of Tanzania lost as a result of what BAe did and I
want to see the payment made in order to benefit those people.

Q3 As to the double jeopardy issue, the offense BAE pleaded guilty to in the
U.S. was not a corruption offense, but rather a charge of conspiracy to
make false statements to the U.S. government including as to its
compliance with the provisions of the FCPA. You are correct that certain of
the factual allegations supporting this non-corruption offense related to
Central and Eastern Europe. Are you suggesting that simply because
facts are alleged in a U.S. prosecution to support a non-corruption charge,
that the U.K. is thereby prohibited from bringing a corruption charge as to
those facts?

A3 Yes. Our double jeopardy law looks at the facts in issue in the other jurisdiction
and not the precise offence. Our law does not allow someone to be prosecuted
here in relation to a set of facts if that person has been in jeopardy of a conviction
in relation to those facts in another jurisdiction. As a result I could not continue to
consider whether to prosecute BAE for an offence relating to Central and Eastern
Europe once BAE had pleaded guilty in the US.

Q4 The U.K. is a member party of the OECD Convention of Combating Bribery

of Foreign Public Officials in International Business Transactions. Article 5
states as follows: “ Investigation and prosecution of the bribery of a
foreign public official shall be subject to the applicable rules and principles
of each party. They shall not be influenced by considerations of national
economic interest, the potential effect upon relations with another State or
the identity of the natural or legal persons involved.” Was the U.K.
government faithful to its OECD obligations in its handling of the BAE

A4 The simple answer to this is, yes. Under the UK system, NGOs can challenge
decisions of the SFO in matters such as this. This was done and leave to bring a
challenge was not granted by the courts.

Q5 Mr. Justice Bean, in his December 21, 2010 sentencing remarks, called the
SFO-BAE plea agreement “loosely and perhaps hastily drafted.” Among
other criticisms Justice Bean lodged, was that the SFO “agreed that there
would be ‘no further investigation or prosecutions of any member of the
BAE Systems Group for any conduct preceding 5 February 2010.” Justice
Bean noted that “it is relatively common for a prosecuting authority to
agree not to prosecute a defendant in respect of specified crimes which are
admitted and listed in the agreement” but Justice Bean was “surprised to
find a prosecutor granting a blanket indemnity for all offences committed in
the past, whether disclosed or otherwise.” Has the SFO ever agreed to
such a blanket indemnity before or was the BAE matter the first and only
such instance? Such a blanket indemnity would seem to suggest that
“member[s] of the BAE Systems Group” committed a criminal offense –
why else would such a blanket indemnity be necessary in the plea

A5 I accept the criticisms of the Judge about the wording of the agreement. I
understand the interpretation that the Judge placed upon the short statement in
the agreement about other cases. The Judge’s interpretation though was not the
intention of the parties. The view of the parties was that, against the backdrop of
the very wide-ranging investigation of BAe’s affairs, the understanding between
the parties was that the SFO would not prosecute the BAe group in relation to
matters which were the subject of its investigations or of which the SFO was
otherwise aware before the date of the settlement. This is agreed by the SFO
and BAe.

Although, therefore, I understand the criticisms of the Judge and his

interpretation of the agreement, the position of the parties is more restricted than
he thought.

Q6 Certain of Justice Bean’s sentencing remarks suggest a powerless

judiciary in bribery and corruption cases – “I have no power to vary or set
aside the Settlement Agreement;” “I also cannot sentence for an offence
which the prosecution has chosen not to charge;” “the Court does not
decide who should be prosecuted.” During the sentencing hearing, Justice
Bean reportedly noted that the “obvious inference” was that part of the
payments at issue were used as a “bribe” to win a lucrative contract and in
his sentencing remarks he stated that it was “naïve in the extreme” to think
that the third party marketing agent who facilitated the payment “was
simply a well-paid lobbyist.” In a February 9th, 2011 article in the Evening
Standard you said, in connection with the BAE settlement, that you would
have liked Justice Bean to have expressed approval of the agreement and
that “people trust judges – if a judge says a settlement is right, then people
are reassured.” However, Justice Bean’s comments all seem to
demonstrate judicial disapproval of the substantive components of the plea
agreement, yet at the same time demonstrate the procedural difficulties a
court has in reviewing SFO prosecutorial discretion. Is this a healthy
system or a system in need of reform? Does this system give any
reassurance to the public that justice prevails in bribery and corruption

A6 Judges have power to reject a plea agreement made by the parties. This would
have been open to the Judge if he had chosen to do so. The Judge though
agreed during the course of the very full argument that lasted a day that the
prosecution could not bring a bribery charge against BAe. This is because the
prosecution were not able to prove the final part of the trail of payments and
show that corrupt payments were made to officials in Tanzania. The Judge
commented on the strong inference that payments were made, but the
prosecution has to satisfy a very high standard in proving this to the satisfaction
of a jury.

My own view is that the current system in my jurisdiction for dealing with parallel
criminal investigations conducted in a number of different countries does not
work effectively and needs change. I would like early judicial involvement. For
example, I think it would be far better if settlements such as the BAe case had to
be brought before a Judge immediately so that a Judge could express a view on
whether the agreement was, or was not, acceptable. This is currently not
possible in my jurisdiction because it would involve Judges becoming involved in
criminal cases before any charges are brought and therefore before the Criminal
Justice System is engaged.

There are other shortcomings in our system which have been highlighted in other
cases. These seem to me to be shortcomings in the system itself. I would like
something that is far more transparent and that commands public confidence,
together with a much stronger role for the judiciary.

As Director of the SFO, I would welcome more involvement by the judiciary at

earlier stages in deciding whether my decisions are right. Unfortunately, this is
not possible at present. Whether any changes are to take place will ultimately be
a matter for the UK Parliament.

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