Understand Your Rights. Solve Your Legal Problems
Niall Hearty of Rahman Ravelli assesses the arguments made and the issues raised regarding reforming the law on corporate criminal liability.
It’s becoming increasingly difficult to remember a time when corporate criminal liability was not on the agenda, or at least up for discussion. The high-profile activities of certain companies and the authorities’ response to them seem to have a way of ensuring the issue holds the attention of the legal and business worlds.
Now we have the Law Commission drawing up options to overhaul fraud laws in a way that could make it easier to prosecute companies in the criminal courts. With the Commission set to produce a paper by the end of the year on its options – now its consultation period is complete – the issue that has prompted much thought and debate now looks set to be tackled once and for all by the powers that be. With seven out of every ten Law Commission reports having been wholly or partly implemented in the last 50 years or so, we are clearly past the point of corporate criminal liability being little more than a debating point.
Corporate criminal liability is an issue that has been focused on the “directing or controlling mind” of a company, and whether that mind (which is usually taken to be a senior company figure) was involved in alleged criminality. As there was never an exact definition of what constitutes a controlling mind, it was thought someone at chief executive level fitted the bill. Come 2019, however, and the Serious Fraud Office’s fraud charges against Barclays over its fundraising in Qatar were thrown out, with the Court of Appeal ruling that the bank’s former chief executive John Varley was not its directing mind. Cue SFO Director Lisa Osofsky saying the narrow scope of the controlling mind test made it hard to hold companies to account, and the Law Commission admitting that its 2010 conclusion that reform was not needed was perhaps out of date.
The Commission’s current options now include a “failure to prevent” offence, which could see companies prosecuted if they have inadequate measures in place to stop fraud. It is an option that appears to be modelled on failing to prevent bribery, which is found in section 7 of the Bribery Act, and the failure to prevent tax evasion offence contained in the Criminal Finances Act. It also appears to have the support of Osofsky. Yet while there are plenty of people who believe that there is a dire need for such reform to reflect the modern, complex nature of many companies, there are also those who worry about piling further compliance burdens on businesses. And then there is the debate over whether any such failures by companies should be viewed as a criminal or regulatory matter.
One strong argument for reform is that the organisation and structure of most modern companies prevent any single individual from having full discretion to act with no accountability to others. This was the case with the Barclays prosecution. That ruling gave further fuel to the argument that there was a need for a fresh look at the law and the supposed protections currently available to larger companies. Supporters of this argument make the point that the present situation makes it easier for the big boys to escape prosecution, while the smaller companies are seen as easier targets – the “low hanging fruit’’ that can be picked off at will by the authorities.
There is merit in this argument. After all, the first contested failure to prevent bribery case saw the conviction of the far from huge Skansen Interiors – a company that had self-reported its problems and had actually ceased trading by the time it was convicted. But extending failure to prevent and attaching criminal liability to a company could bring its own problems. The idea of punishing a company’s board, its shareholders and other interested parties for the actions of employees who can, after all, be punished as individuals could be seen as a way of beating a business with an unnecessary stick. While it can be argued that the modern, devolved structure of many companies does make it hard to pin corporate responsibility on them, it could also be stated that such structures are in place to improve compliance rather than to act as a means of evading prosecution. Any change in the law will have to be carefully calibrated to reflect this.
With the Law Commission expected to report its findings later this year, it is important to note that any legislative change is not likely until at least 2022 or 2023. The arguments regarding corporate criminal liability, it seems, are set to rumble on for some time, with little likelihood of a quick fix - let alone one that pleases everyone.
The justices declined to hear an appeal of a lower court’s decision upholding the surcharge by two trade groups representing generic drug makers and drug distributors, and a unit of UK-based pharmaceutical company Mallinckrodt, which filed for bankruptcy protection last year.
Amongst the law’s challengers were the Association for Accessible Medicines, whose members include Mallinckrodt, Teva Pharmaceutical Industries, and the Healthcare Distribution Alliance.
Three of the largest opioid distributors in the US — McKesson Corp, AmerisourceBergen Corp, and Cardinal Health — were members of the alliance. In July, they proposed paying $21 billion to resolve lawsuits accusing them of fueling the opioid epidemic.
The payments to New York were owed under the Opioid Stewardship Act, which was signed into law in 2018 to address the rising costs of the opioid crisis imposed on the state. It marks the first time a state has sought to impose a tax on opioid companies over the epidemic. Minnesota, Rhode Island, and Delaware have since adopted their own, similar taxes.
In separate statements, the Association for Accessible Medicines and the Healthcare Distribution Alliance said they were disappointed in the Supreme Court’s actions. The alliance said it is evaluating its options and is working out what its next steps will be.
The former president filed a request for a preliminary injunction against the social media giant in the US District Court for the Southern District of Florida. He argued that Twitter was “coerced” by members of the US Congress to suspend his account.
In January, Twitter and several other social media giants removed Trump from their platforms following the Capitol riots which led to the death of five people. The attack by Trump’s supporters was followed up by a speech by the former president in which he reiterated false claims that his election loss in November was caused by widespread fraud.
At the time of removing Trump’s account, Twitter said his tweets had violated its policy barring the "glorification of violence" and were “highly likely” to encourage people to replicate what had happened in the Capitol riots.
Before his account was suspended, Trump had over 88 million followers on Twitter.
David Brown, who filed the lawsuit, is jointly employed by the Alphabet Inc unit and security company Allied Universal. Brown is seeking unspecified monetary damages for alleged physical and emotional harassment at Google’s LA offices based on both his race and sexual orientation. The suit claims the harassment took place between 2014 and last year.
Brown’s supervisor, Henry Linares, allegedly accounted for much of the harassment, including “grabbing him on the buttocks, kicking him in the groin, throwing him through a window head first and brutally grabbing his nipples." According to the filing, Linares was fired for other reasons this year.
Over a series of messages last year regarding items missing from Google’s offices, Google's senior manager for global community operations, Rus Rossini, sent Linares the message “strip searches for all.” According to the lawsuit and a screenshot of the exchange seen by Reuters, the supervisor replied, "David is going to love that," with Rossini then saying, "Tell David to bend over." The supervisor, who shared the screenshot with Brown, responded, "hahah I'll tell him you said Hellooo."
Following the death of George Floyd last year, many major companies stepped up efforts to create more inclusive and safe workplaces, including Google. However, employees at Google, including over 2,000 who signed an open letter on the issue back in April, have said the tech giant fails to sufficiently hold perpetrators of racism and bullying to account.
The newly acquired debt facility is intended to help Fresh Thinking Capital to further grow its loan book and provide funding to its SME clients.
Fresh Thinking Capital is a Leeds-based company that provides short-term secured business loans to UK SMEs seeking prompt financing. The firm was founded in 2018 by Melanie Hird and Andrew Walls and has lent more than £50 million to almost 40 businesses. Melanie Hird and Oliver Bates, private debt manager at Foresight, both lauded the success of the deal.
Foresight Group was advised by Cadence Advisory on security and portfolio due diligence, SC Advisory Services on financial due diligence, Shakespeare Martineau on legal due diligence, and KryptoKloud on cyber due diligence.
Phil Dine and Andrea Unwin from Clarion’s banking team provided legal advice to Fresh Thinking Capital. Fresh Thinking Capital was advised by Clarion, The Duncan Chartered Accountants and Altenburg Advisory on legal matters, accounting and corporate finance respectively.
Frigorífico Concepción, Paraguay’s second-largest meat producer and exporter, has returned to the international market with a debt issue for $300 million. The bonds, guaranteed by its Bolivian subsidiary Frigorífico BFC, registered a coupon of 7.7% and mature in 2028. The company also launched a simultaneous offer to purchase its senior secured notes with a coupon of 10.25% and maturing in 2025 for $155.7 million of an outstanding capital of $161 million. The company obtained the consent of 96.71% of bondholders to execute the proposed amendments to the notes. Both operations concluded on 21 July 2021.
Asunción-based Estudio Jurídico Gross Brown and New York-based Milbank advised BofA Securities as Sole Book-Runner and manager in the issuance of the new bonds under Rule A and Regulation S of the United States, and dealer manager as in the repurchase. Cleary Gottlieb Steen & Hamilton advised the issuer and PPO Abogados advised the guarantor, Frigorifico BFC.
The Gross Brown team was led by partner Sigfrido Gross-Brown, senior associate Mauricio Salgueiro, and junior associate Kamila Gimenez. The practice areas involved were capital markets, corporate & tax, and antitrust.
Raiffeisen Bank International AG has acquired Credit Agricole Bank Serbia a.d. Novi Sad and its subsidiary CA Leasing Serbia from Credit Agricole S.A. The closing of the transaction, which remains subject to customary regulatory and competition clearances, is expected to take place in Q1 of 2022.
Marić, Mališić & Dostanić acted as legal advisor to Credit Agricole SA during the sale. The team was led by managing partner Ana Marić and comprised partners Rastko Mališić and Oliver Radosavljević, as well as lawyers Uroš Žigić and Marina Živanović. Aside from the principal M&A aspect of their role, the team also also covered regulatory, competition and labour issues for the seller and provided full transactional support in all phases of the deal. D’Ornano Partners also advised Credit Agricole.
Raiffeisen Bank was advised by AP Legal and CMS. The AP Legal team was headed by partner Aleksandar Preradovic and included senior associates Jovan Cirkovic and Dusan Preradovic and consultant Maja Stojiljkovic. The CMS team was led by London partner Eva Talmacsi.
Pythagoras Communications is a Berkshire-based firm that specialises in professional services using Microsoft technology platforms such as Azure, Dynamics 365, SharePoint and the Power Platform.
The Moorcrofts team was led by partner Will Pearce (corporate) and comprised partners Tim Astley (commercial), Julia Ferguson (property) and Matt Jenkin (employment), associate Adam Forder (corporate) and solicitor Heather Stewart (corporate).
“We are thrilled to have advised Julian and Emma Stone and the shareholders of Pythagoras Communications on their sale of such a fast-growing and well-established business to one of the most respected firms in the UK,” said Pearce.
Pythagoras Communications founder Julian Stone also lauded the deal. “We were delighted to work with Moorcrofts, who have been appointed as our corporate and commercial legal team since 2011,” he said.
DLA Piper acted for EY.
GSK Stockmann advised Edeka Südwest on the sale of more than 400 in-store bakeries in Saarland, Hesse, Rhineland-Palatinate and Baden-Württemberg to local merchants. As part of this transaction, the Edeka companies K&U and Bäckerhaus Ecker concluded a reconciliation of interests and a social plan with employee representatives. A collective wage agreement is also part of the package.
The K&U bakery is based in Offenburg. Via the intermediate company Bäckerbub, it belongs to the Edeka Südwest group of companies. The Hans Ecker bakery (whose branch network is mainly in Rhineland-Palatinate and Saarland) has also been part of this network since 2010, whose branch network is mainly in Rhineland-Palatinate and Saarland. Explaining the move, Edeka commented that the in-store bakeries had incurred increasing losses in recent years, which had worsened due to the COVID-19 pandemic.
In addition to concluding the aforementioned reconciliation of interests and a social plan, the approximately 3,000 employees working at the sold bakeries will receive 2.3% increase to wages and salaries from 1 August. From 1 January 2022, there will be a further 2.3% increase.
The Argentina-based Werthein Group acquired Vrio, a business unit of US media giant AT&T. Vrio provides live and on-demand digital entertainment services in 4K format for 10.3 million subscribers across 11 countries through Directv Latin America, SKY Brasil and Directv GO. The company’s assets are made up of satellites and transmission centres, and it has 9,000 employees.
This deal does not include Vrio’s broadband business in Colombia or AT&T’s stake in SKY México. The total cost of the negotiation was not disclosed, but AT&T reported losses of $4.6 billion for the asset under negotiation, $2.1 billion of which was accounted for by foreign currency translation adjustments. AT&T will continue to support Werthein Group in the context of billing, infrastructure and software over a period of between one and three years. For Werthein Group, the deal represents its return to the telecommunications business, in which it formerly participated through Telecom Argentina. The transaction, which remains subject to customary conditions, is expected to close in early 2022.
AT&T was advised on the transaction by Sullivan & Cromwell. The buyer was advised by a range of firms including Skadden; Bruchou, Fernández Madero & Lombardi; Demarest Advogados; Carey; Rodrigo, Elías & Medrano Abogados; Posse Herrera Ruiz; Bustamante & Bustamante; D’Empaire, BSZE; Chancery Chambers; Guyer & Regules, and Pollonais, Blanc, de la Bastide & Jacelon.
The Pollonais, Blanc, de le Bastide & Jacelon team was led by Associate Ranjana Rambachan who acted as Legal Counsel for conducting the due diligence, advising on and filing of regulatory applications, general areas of corporate and commercial and intellectual property advice and all other areas of legal advice associated with the transaction in Trinidad and Tobago.
