A judge approved Britain's first deferred prosecution agreement (DPA), a new type of plea deal, on Monday in a case centred on $6 million in bribes paid to Tanzanian officials by the Tanzanian unit of South Africa's Standard Bank (SBKJ.J).
Under the deal with the Serious Fraud Office (SFO), the London arm of Standard Bank, which worked with the bank's Tanzanian subsidiary on a 2012-2013 transaction to raise $600 million (£399 million) for the Tanzanian government, faces penalties totalling $32.2 million after admitting to failing to prevent bribery.
Introduced into English law last year, a DPA is a court-approved deal under which a company charged with wrongdoing agrees to sanctions that can include fines and additional supervision, in return for legal proceedings being suspended.
The penalties in this case include a $16.8 million fine to be paid to the SFO, a $6 million fine plus interest of over $1 million to be paid to the government of Tanzania, and $8.4 million in disgorgement of profits.
London-based Standard Bank Plc has since changed its name to ICBC Standard Bank following the acquisition of a controlling stake by China's ICBC earlier this year.
The new DPA procedure is seen as a potentially useful tool for British law enforcers to tackle corporate wrongdoing as prosecuting companies in Britain can be very costly and complex.
"This landmark DPA will serve as a template for future agreements," Director of the SFO, David Green, said in a statement after the agreement was approved by senior High Court judge Brian Leveson at a public hearing.
Handing down his judgement after hearing a detailed account of the facts and of how the SFO had arrived at those figures, Leveson said the DPA was "fair, reasonable and proportionate" and was in the public interest.
Lawyers predicted that the DPA would be the first of many.
"There has been fairly widespread concern that the U.S.-style plea deals present a way for big companies to simply 'buy their way out of trouble'," said Barry Vitou, partner and head of Global Corporate Crime at law firm Pinsent Masons.
"The bar in the UK will, however, be set much higher. A key difference here is that judges will independently assess DPAs, and will only sign off on them if they are in the interests of justice," he said.
CASH WITHDRAWALS
The case stems from a sovereign note private placement undertaken in 2012-2013 by Stanbic Bank Tanzania Ltd and London-based Standard Bank Plc to raise $600 million for the Tanzanian government as part of its five-year development plan.
In a lengthy statement setting out the details, SFO counsel Edward Garnier told the court that Stanbic and Standard Bank had initially quoted a fee of 1.4 percent of gross proceeds raised, but matters did not progress until that went up to 2.4 percent.
Evidence showed that the additional 1 percent, worth $6 million, was paid to a "local partner", a Tanzanian company called EGMA, for supposed consultancy services.
These arrangements were made by Bashir Awale, then chief executive of Stanbic, and Shose Sinare, then the unit's head of corporate and investment banking. Awale was later sacked, while Sinare resigned.
EGMA's chairman and one of its three shareholders and directors was Harry Kitilya, then head of Tanzania's tax authority, while its managing director was Fratern Mboya, ex-CEO of Tanzania's Capital Markets and Securities Authority.
Garnier said the purpose of the $6 million was to induce government officials to show favour to Stanbic in appointing it to conduct the private placement, and to reward those whom Awale and Sinare believed had been induced to act improperly.
The money was deposited into an EGMA account in March 2013, and withdrawn by Mboya in large cash amounts within days. Garnier told the court the cash has never been traced.
The cash withdrawals raised suspicions within Stanbic Tanzania, with four employees raising concerns. After those were escalated to head office in South Africa and to London, the UK-based subsidiary reported itself to law enforcement agencies.
Standard Bank Group said in a statement it had fully cooperated with investigators from the outset.
"The group and its subsidiaries take the risk of corruption very seriously and deeply regret that this issue arose on a transaction with which they were involved," it said.
Kitilya resigned from the tax authority in December 2013, while Mboya died in July that year.
ICBC, which acquired 60 percent of London-based Standard Bank in February, had no direct interest in the bank at the time of the corrupt transaction, and had no involvement in the incident in any way.
