In the next in our series on international whistleblowing and corruption we focus on the fascinating Republic of Cuba. From Batista through the revolutions of Raúl and Fidel Castro to more recent crackdowns on white collar or guaybera crime, Cuba has been, and will undoubtedly remain, a compelling study in politics and political change.
The Corporate Manslaughter and Corporate Homicide Act 2007, which came into effect in April 2008, achieved its first conviction in February this year, of Cotswold Geotechnical Holdings Ltd.
The case attracted huge media attention purely as it was the first conviction under the Act. However, there may be wider ramifications for employers and it remains to be seen whether or not the Act will lead to larger companies being prosecuted. As Cotswold Geotechnical Holdings was run by a sole owner and was a small organisation, it was felt that this case did not determine the full extent of the Act, which was established to address the problems of convicting larger organisations. The real test will be when a substantial organisation with an elaborate management structure is prosecuted.
When the Act initially came into force it was implied that there would be an average of 12 cases per year. However, the Crown Prosecution Service has mentioned that they are contemplating a number of other records of evidence in relation to possible further prosecutions for the offence. Prior to the law coming into effect, it had been hard to convict bigger companies but it was possible for a corporate body to be prosecuted for a selection of criminal offences including the common law offence of gross negligence manslaughter. However for an organisation to be guilty of an offence, it was imperative for a senior member of staff, such as a managing director (known as a controlling mind) to be guilty of the offence. Where any events occurred prior to 6th April, the pre-existing law applies and the current Act only applies to deaths where the injury or behaviour leading to the death, occurs on or after 6th April.
The Act focuses on the way in which a business’ activities are maintained and co-ordinated, which is generally referred to as “management failure” and whether that caused death and was a gross breach of the relevant duty of care. In addition the way in which activities are maintained and co-ordinated by senior management needs to be a significant aspect of the breach.
Organisations need to consider the sentencing guidelines, as they do not only apply to corporate manslaughter cases but also to health and safety offences that result in a person losing their life. The director of Cotswold Geotechnical Holdings was charged with an offence under the HSAW as well as gross negligence manslaughter. It was the company itself who was the first to be charged under the 2007 Act. The Act indubitably predicts concurrent prosecutions for both breaches in health and safety as well as corporate manslaughter as both of these emerge from identical facts.
It is likely that both the Health and Safety Executive and The Crown Prosecution Service will persist in prosecuting senior officials with health and safety offences which carry serious sentence, including imprisonment. One of the main sanctions for conviction under the Act is an unrestricted fine. Sentencing guidelines published in February 2010 stated that fines should seldom be less that £500,000. Cotswold Geotechnical Holdings were fined £385,000 to be paid in equally split amounts over a period of ten years. This decision was based purely on the company’s financial situation, although it is plausible the company may go into liquidation as a result of the conviction. The presiding judge at the time said that if the company was to go out of business that would be a consequence of the appalling breach that had been committed.
Cotswold Geotechnical Holdings has applied for permission to appeal its conviction. At the time this article has been published, no other information is currently available.
View our update on the Corporate Manslaughter Act (March 2012).
Financial companies are amongst those likely to be targeted for incidents of employee fraud. Recent news that former state Senator Christopher Maselli was jailed for 27 months, for fraudulently obtaining $1.7 million, highlights that fraudulent behaviour is carried out by people from all areas of society.
The financial services industry recorded one of the highest losses to fraudsters amongst UK sectors, according to data released by the National Fraud Authority (NFA)*. Its Annual Fraud Indicator (AFI) found that £3.6 billion was lost from fraudulent activity, which is only a slight decrease on the 2010 figure of £3.8 billion. Despite utilising improved fraud prevention methods, card transaction losses accounted for £440 million, cheque fraud £30 million with on-line banking has recorded an increase of 14% equating to £60 million. Mortgage fraud stood at £1 billion and insurance at £2.1 billion. Following collaboration between the NFA and the Federation of Small Businesses (FSB) a new inclusion to the AFI showed losses to SME’s employing less than 250 people contributed £780million toward fraudulent activity.
Banking is no longer the transparent financial service it was; the ever-changing environment in which they operate means that the regulatory problems struggle to be resolved: new issues emerge and old issues reappear in a different form. It remains imperative that companies utilise new technologies to assist with incident management and provide employees with an effective tool to quickly communicate events that may carry risks of loss or litigation. Greater emphasis must be placed on educational initiatives to enhance and promote the benefits of fraud prevention and detection systems within companies. As part of Expolink’s on-going commitment to helping businesses reduce the risk of fraudulent activity, it introduced a web-based Incident and Case Management solution that provides a comprehensive interface for data entry, reporting and investigative enquiries and much more.
Report Exec allows users to create, share and protect detailed records of incidents taking place within the company. Using the online reporting facility, financial organisations can immediately provide a tool to log unlimited reports of unusual activity anywhere in the world at anytime, whilst managing the flow of information to administrators far more efficiently. Complete with a comprehensive case management module, specific incidents can be investigated whilst powerful trend analysis properties help identify more serious circumstances.
It is hoped that the AFI statistics will push initiatives in the field of fraud prevention further for the financial sector. It is vital that companies work together and take action to prevent the increase in fraudulent activity. In the current economic climate, businesses need to work intelligently in all areas of loss prevention and improve efficiency to maintain a competitive edge.
(* Figures obtained from NFA)
Expolink is pleased to announce the introduction of a new module for its Incident and Case Management solution, Report Exec. The new ‘Crime Reports’ module, partners with Police authorities across the UK and offers the largest and most accurate resource for timely, street-level crime and sex offender information on the web. The Crime Reports network offers a myriad of affordable, easy-to-use software tools, which are created to help not only Police authorities but also many businesses understand crime trends, share up-to-date information and receive actionable intelligence. Crime Reports relies on individual Police authorities to provide details on crimes. Each authority is different and may provide more or less crime information than others. At a minimum, Crime Reports requires four items of information when mapping crimes: type, location, date, and time. All additional information is voluntarily supplied.
The Crime Reports’ built-in intelligent platform focuses on external factors and risks posed to businesses and, through linking this to Report Exec, provides daily messages and alerts to the authorised users. This information can be used to inform company directors who can in turn use this in line with company strategy to communicate health and safety to employees.
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The SFO is the lead agency in the UK for investigating and prosecuting cases for oveseas corruption.
The interview transcription has been uploaded with kind permission of Corporate Compliance Insights. Director of the Serious Fraud Office, Richard Alderman provides his thoughts on bribery and corruption.
