ICBC Standard Bank to pay $37 mln in landmark bribery plea deal

LONDON, Nov 30 ICBC Standard Bank Plc agreed to pay nearly $37 million and enter into a British financial regulator’s first deferred prosecution agreement to end probes into bribery of officials in Tanzania.

The accord marks the first time that Britain’s Serious Fraud Office has used a DPA, which typically lets a company avoid prosecution if it pays a fine and implements compliance measures.

Monday’s settlement resolved claims centred on an alleged $6 million bribe paid to Tanzanian officials by the Tanzanian unit of South Africa’s Standard Bank, in connection with work in 2012 and 2013 on a $600 million private placement for the government.

ICBC Standard Bank agreed to pay

the SFO a $16.8 million fine and
about $500,000 to cover costs, disgorge $8.4 million of profit, and pay $7.05 million to the Tanzanian government.
It also agreed to pay $4.2 million to settle related civil charges by the U.S. Securities and Exchange Commission.

The three-year deferred prosecution agreement incorporates a statement of facts detailing the bank’s alleged failure to prevent bribery.

London-based Standard Bank changed its name to ICBC Standard Bank following the acquisition of a 60 percent stake by China’s ICBC in February.

NEW TYPE OF AGREEMENT

The Serious Fraud Office gained power last year to use DPAs, commonly used in the United States.

Such agreements are seen as potentially useful tools for British law enforcers to tackle corporate wrongdoing, given the cost and complexity of prosecuting companies in Britain.

“This landmark DPA will serve as a template for future agreements,” SFO Director David Green said in a statement, after ICBC’s agreement was approved by senior High Court judge Brian Leveson at a public hearing.

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 in Britain.

“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.

“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 added.

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. Four employees raised 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 had no direct interest in the bank at the time of the corrupt transaction, and no involvement in the matter. (Additional reporting by Jonathan Stempel in New York; Editing by Susan Fenton and Howard Goller)

Notes for editors:

Please see

the Deferred Prosecution Agreement, http://www.sfo.gov.uk/media/289870/20151127 – deferred prosecution agreement – sfo v icbc sb plc.pdf
the Statement of Facts, http://www.sfo.gov.uk/media/289866/20151127 – sfo v icbc sb plc – statement of facts.pdf
the preliminary judgment https://www.judiciary.gov.uk/wp-content/uploads/2015/11/sfo-v-standard-bank_Preliminary_1.pdf
full judgment https://www.judiciary.gov.uk/wp-content/uploads/2015/11/sfo-v-standard-bank_Final_1.pdf

The charge against Standard Bank has been suspended for three years, after which, subject to the bank’s compliance with the terms of the DPA, the SFO will discontinue the proceedings.
Standard Bank’s US$25.2 million total financial penalty, which is payable to HM Treasury, consists of a US$16.8 million financial penalty and a US$8.4 million disgorgement of profits.
The compensation due to the Government of Tanzania consists of US$6 million, plus interest of US$1,046,196.58.
Standard Bank is required to pay the compensation, disgorgement of profits, financial penalty and costs within seven days of today’s judgment.
The money due to the Government of Tanzania will be returned in line with advice being received from the Department for International Development.
A DPA is not a private plea “deal” or “bargain” between the prosecutor and the defendant company. It is a way in which a company accounts for its alleged criminality to a criminal court, and can have no effect until a judge confirms in open court that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate. Further information on the history of DPAs and how they are intended to be used can be found here.