Posted by: Susan Hawley | April 19, 2010

First UK executive jailed for bribery

Former vice-president of De Puy, the UK subsidiary of US company Johnson and Johnson, jailed for 12 months for helping arrange £4.5 million worth of bribes in Greece.

Robert John Dougall, the former vice-president of De Puy Inc and marketing director of De Puy International – both subsidiaries of the US pharmaceutical company Johnson and Johnson – was jailed on the 14th April for 12 months. Dougall pleaded guilty to conspiring with De Puy to make corrupt payments to Greek health officials, primarily surgeons, to entice them to recommend De Puy orthopaedic products and other medical equipment to the Greek national health service (for the SFO press release, see here). The payments were made between February 2002 and December 2005. Greek taxpayers footed the bill for the corrupt payments as prices charged by De Puy for the orthopaedic products were inflated to cover the payments. The prices paid in Greece for the equipment were double what was paid elsewhere in Europe. In 2004 an attempt to end the payments was aborted after Dougall estimated that doing so would end in a 95% loss in turnover for the company in the Greek market. 

The SFO had asked the Judge that Dougall be given a suspended sentence because of the assistance he had provided during the investigation. Mr Justice Bean said that such a suspended sentence was not suitable “in a case where corruption was systemic and long-term and involved several million pounds in corrupt payments. The public would simply not accept if someone involved in long term criminality on this scale was not given an immediate sentence of imprisonment.”

Coming after the Innospec case, this case shows again that the courts are prepared to question the SFO’s ‘soft on those who cooperate’ approach. Dougall is the first ever executive to be jailed in the UK for bribery. In September 2008, Neils Tobiasen, the Danish managing director of a British security consultancy, CBRN, was given a suspended sentence after pleading guilty to paying around £70,000 in bribes in Uganda.

A key question is what approach the SFO will now take to the company itself. Mr Justice Bean said “corruption was in effect a company policy predating [Dougall’s] involvement and approved by [his] superiors“.  What the SFO does now in relation to De Puy itself will be a key test of whether it has taken on board the comments of Lord Justice Thomas in the Innospec case (see below), or whether it plans to plough on with its civil settlement approach for self-disclosing companies. Lord Justice Thomas said that civil sanctions were generally inappropriate for companies guilty of corrupting foreign officials.

In its 2010 annual report, Johnson and Johnson said that it had first received a subpoena from the US Security and Exchange Commission (SEC) in February 2006 with regard to the participation of several of its subsidiaries in the UN Iraq Oil for Food Programme. The company says that in February 2007, it voluntary disclosed to the US Department of Justice and SEC that non-US subsidiaries had made improper payments in two “small market-market” countries, and that subsequently, payments in additional markets were disclosed which may give rise to liabilities under the US Foreign Corrupt Practices Act (FCPA). Johnson and Johnson says that it is currently cooperating with investigations by the DOJ, SEC and by agencies in other jurisdictions investigating allegations that have arisen as a result of its voluntary disclosure.

What the SFO does with De Puy itself will also be a key test of its approach to the EU Procurement Directives that require companies convicted of corruption to be barred from public contracts (see Analysis page on the EU Procurement laws). De Puy and its parent company Johnson and Johnson have a large amount of business in the EU. In January 2010, new corporate prosecution guidelines came into force for the prosecution agencies including the SFO, which allow prosecutors to take into account whether the EU Procurement Directives will be triggered as a public interest factor against prosecuting. If the SFO takes a civil settlement approach with De Puy on the basis that the EU Directive would be triggered, this could leave it open to charges that it is seeking to evade the EU Directive.

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