Tuesday, 29 November 2016

Australian criminal and civil consequences for bribery committed overseas

Local and international media are reporting that an Australian Rio Tinto executive has been suspended and subsequently dismissed amidst a scandal involving a multi-million dollar payment to an apparent associate of the Guinean president.  The exact nature of the payment is at this stage unclear, and investigations continue.

JP Morgan is also reportedly set to settle with US authorities following a long-running bribery investigation into the bank’s hiring practices in China.

It’s timely therefore to consider the potential consequences of overseas bribery.  What might happen if an Australian is caught in the act?

How serious is bribery?
Revelations of bribery call a company’s corporate governance into question.  It places at risk a company’s reputation and trustworthiness.

Further, foreign bribery carries significant criminal penalties and civil consequences in Australia (we explain these below).

It is important that companies take the risks posed by bribery seriously.  A quick, decisive response is often the best way for companies to limit the damage caused upon the discovery of potential bribery having been committed.

The criminal offence
Bribery by an Australian citizen is a serious crime that can be prosecuted in the Australian courts – even if the bribe was made overseas to a foreign government or official.

Section 70.2 of the Criminal Code Act 1995 (Cth) outlines the relevant offence of ‘bribing a foreign public official’.  It is a crime for an Australian citizen, resident or corporation to:
  • provide a benefit to another person
  • if that benefit is not ‘legitimately due’, and
  • where the payer provides the benefit with ‘the intention of influencing a foreign public official … in the exercise of the official’s duties as a foreign public official’. 

It is important to remember that:
  • the crime can be committed even if the relevant benefit is provided outside of Australia (e.g. payments made overseas)
  • a ‘benefit’ need not be a payment – it can be any advantage and is not limited to property, and
  • a foreign bribery offence can occur even if a foreign public official didn’t receive the money directly.

Criminal penalties for the perpetrators
The maximum penalty for an individual convicted of the offence of bribing a foreign public official is 10 years imprisonment, or a fine of up to A$1.8 million, or both.

If a corporation commits the offence, it can also be penalised in the maximum amount of:
  • $18 million, or
  • if the value of the benefit obtained from the bribe can be ascertained – 3 times that value, or
  • 10% of the corporation’s annual turnover. 

In addition to criminal penalties, the benefits obtained through bribery may be forfeited to the Australian Government under the Proceeds of Crime Act 2002 (Cth).

Possible civil action
In addition to criminal punishment, corporations may consider civil remedies against their officers or employees who made the bribe, if it can be shown that the payment caused loss and damage to the company, and the company has a cause of action against the relevant individual.

The employer potentially can claim any or all of the following causes of action against the employee:
  • breach of fiduciary duty
  • breach of statutory duties as set out in Part 2D.1 of the Corporations Act 2001 (Cth) (assuming that the person who made the bribe can be shown to be an ‘officer’ of the employer for the purposes of the Corporations Act), or
  • breach of employment contract – depending on the terms of the contract and whether any applicable corporate policies prohibiting bribery are held by a Court to have contractual force. 

As a member of the International Fraud Group McCullough Robertson is well-placed to assist clients with the international aspects of white collar crime, including matters involving potential foreign bribery offences and related issues considered above.

Peter Stokes

+61 7 3233 8714

Daniel MacKenzie

Senior Associate
+61 7 3233 8864

Friday, 11 November 2016

Continuous disclosure obligations - Who is continuously obliged?

If your company breaks the law, that’s not your problem, is it?  And surely if your client breaks the law, you’re in the clear?

Unfortunately it is not that simple.  This article will consider who is potentially liable for a breach of continuous disclosure obligations.

Monday, 24 October 2016

Putting out the fire – cracking down on illegal phoenix activity

‘We didn't start the fire
It was always burning since the world's been turning
We didn't start the fire
No, we didn't light it, but we tried to fight it’1

The Illegal Phoenix 
Illegal phoenixing is a major problem in corporate Australia.  In this post we consider what illegal phoenix activity is, how the problem is affecting the Australian economy and the recent regulatory crackdown on the issue.

In Greek mythology a phoenix is a mythical bird which obtains new life by rising from the ashes of its predecessor.  Illegal phoenix activity involves the intentional transfer of assets at an undervalue from an indebted company to a new ‘phoenix’ company.  The old company remains with its debts and is often placed into liquidation (or is left to be wound up on the application of a creditor) – stripped of any valuable assets, with nothing left to pay creditors.

Monday, 26 September 2016

Queensland: A fraudulent State of mind? Jail time for former Kleenmaid and Wickham Securities directors

In recent months the Queensland District Court has found the directors of two former Queensland based companies guilty of fraud.  This will hopefully bring a small amount of relief to those who have suffered at the hands of the fraudulent directors in question.

Tuesday, 19 July 2016

Former fintech owner takes on Visa

In September 2015, the Federal Court ordered Visa Worldwide Pte Ltd (Visa) to pay a pecuniary penalty of $18 million for engaging in anti-competitive conduct.

Visa’s exposure from this finding may extend beyond this penalty, as commercial entities allegedly affected by this conduct also take up arms against the global payments technology company.

Thursday, 14 July 2016

The validity of agreed penalties in the civil jurisdiction

In October 2015 the High Court handed down its much anticipated decision in Commonwealth v Director, Fair Work Building Industry Inspectorate & Ors (2015) 326 ALR 476 (Cth v FWBII) on the validity of agreed penalties in the civil jurisdiction.  For regulators such as Australian Securities and Investment Commission (ASIC), the Australian Competition and Consumer Commission (ACCC), the Fair Work Building Industry Inspectorate (FWBII) and Comcare, the stakes were high.

Monday, 4 July 2016

Freezing Orders Explained

Victims of white collar crime, whether large or small businesses, can all face a real dilemma when the crime is discovered – can we get our money back?

The answer may be to obtain an asset freezing order from the Courts.