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The Bertling case shows that pleading guilty may sometimes bring too sweet a deal

November 2, 2017

Photo Credit: Bernard Spragg, NZ on Flickr (CC0 1.0)

 

In securing guilty pleas from global shipping and logistics company Bertling and its top-level employees, the SFO has shown itself to be an able and active prosecutor, but the case leaves question marks over the UK’s ability to effectively punish corruption with the defendants, so far, escaping harsh sanction.  

 

F.H. Bertling Limited, a former UK-based subsidiary of the 150-year-old family-run shipping and logistics group which has 60 offices in 30 countries, pleaded guilty in August 2017 after being accused by the Serious Fraud Office (SFO) of paying hundreds of thousands of dollars in bribes to a top-level official at Angolan state-owned oil company Sonangol. Six former and current employees, including a number of Bertling Group directors, also pleaded guilty over the course of the past year to offences under the Prevention of Corruption Act 1906.

 

Despite the guilty pleas, the Bertling Group appears to be continuing to operate in the UK largely unaffected, while a number of individual defendants have escaped without serving jail time. In fact, one defendant continues to serve as a director in the parent company despite pleading guilty in March 2017.

 

A failed bribery plot

 

The Bertling case, which is largely based on documents that the SFO seized from the shipping company, BP and banks, including Barclays, took over a year to wind its way through the courts of London.

 

Two directors of the UK subsidiary, Stephen Emler and Giuseppe Morreale, were the first to plead guilty in September 2016. Four more guilty pleas came in March 2017, including a manager in the UK subsidiary, Marc Schweiger, as well as Bertling Group directors Dirk Jürgensen, Joerg Blumberg and the now deceased Ralf Petersen.

 

The company was the last to plead guilty, but the full details of the case only became apparent during the September 2017 trial of Peter Ferdinand, a former director of the UK subsidiary, who no longer worked at Bertling when bribes were paid and was acquitted of wrongdoing.

 

During the trial, prosecutor Jonathan Kinnear went into great detail about the mechanics of Bertling’s bribery scheme, which was set up by directors in the company to corrupt an erratic and somewhat volatile – at least in the SFO’s portrayal – official at Sonangol who controlled Block 18, a major source of oil off the coast of West Africa that BP has access rights to.

BP could get very little done on block 18, including paying for subcontractors, without the stamp of approval of Sonangol official Francisco Bravo Paulo. Obtaining the approval of Paulo was essential for F.H. Bertling Limited which in the mid-2000s was looking to expand into Angola and had an agreement with BP worth some US$20 million to oversee, among other things, the transport of supplies to Block 18. 

 

In July 2005, Bertling allegedly paid US$100,000 to a middleman who passed US$80,000 onto Paulo. However, this bribe was not enough for Paulo, who in the course of the year following the bribe payment began with increasing intensity to threaten to cancel BP’s contract with Bertling in Angola, the SFO says.

 

Paulo’s threats forced Bertling’s board into action. In a flurry of emails sent in the spring of 2006 the board discussed the possibility of placating Paulo with further “commission” payments totaling some US$350,000.

 

On 24 July 2006, BP and Bertling held a conference call to discuss, among other things, difficulties with Sonangol, which was refusing to sign off on key documents and withholding funds needed for the transport of goods to block 18. The very same day Bertling decided to pay a further US$250,000 to Paulo. The money was transferred to an associate of Paulo, most of which, the SFO alleges, was then passed onto the Sonangol official.

 

The payment proved ineffective. Less than a month later, Bertling’s contract with BP was cancelled. However, BP’s troubles in Angola did not stop there. According to the SFO, BP’s chosen replacements on Block 18, Panalpina and DHL, soon ran into problems with Paulo who, as with Bertling before, refused to sign off on key customs documents.

 

Of course, Panalpina was itself sanctioned for paying bribes in various countries to win contracts and circumvent customs regulations. This included $4.5 million to Angolan officials, some of which was paid in the period that Panalpina had the block 18 contract. However, the US Department of Justice’s 2010 deferred prosecution agreement with Panalpina does not specify which, if any, oil blocks in Angola were affected by bribery.

 

US authorities continue to examine the dealings of western companies with Angola’s Sonangol. In March 2017, the Financial Times reported that the US Securities and Exchange Commission was looking at an oil deal in which BP and its Texan partner Cobalt International Energy agreed to pay $350 million for a Sonangol-run research centre that has not yet been built.

 

As for F.H. Bertling Limited, its saga with the SFO continues. The company has been charged by the SFO in a separate case over alleged bribe payments to agents of energy company ConocoPhillips to win shipping contracts in the North Sea. However, the case that kicked off the SFO’s interest in Bertling – in 2012, the company self-reported possible corruption in Azerbaijan, although interestingly not in Angola – appears to have gone cold.

 

A small price to pay?

 

On 20 October, His Honour Judge Pegden QC sentenced three of the convicted defendants in the Angola Bertling case: Schweiger, Blumberg and Jürgensen. The four remaining defendants will be sentenced at a later date.  

 

Judge Pegden imposed a £20,000 penalty on each of the three defendants and disqualified them from serving as company directors for five years. The penalty is small considering that Schweiger will receive more than £110,000 as part of a pay off package from his most recent employer, which he left in the wake of his conviction.

 

The judge also only handed out suspended jail terms, and did not order the trio, in accordance with the wishes of the SFO, to pay confiscation or legal costs.

 

Judge Pegden said his decision to impose suspended sentences was “finely balanced”. Nevertheless, the Bertling case highlights the worrying possibility that an individual can escape jail despite playing a central role in a cross-border bribery scheme that corrupts a senior public official with large sums of money.

 

Continuing as before in the UK

 

The Bertling Group says it has drawn a line under the Angola bribery scandal, citing the fact that the convicted UK subsidiary is no longer part of the shipping and logistics group having been sold to a third party. An Iraqi company - Time of Solutions General Trading, General Transport and Maritime Services - acquired the UK subsidiary’s entire shareholding in March 2017.

 

It is unclear why an Iraqi company decided to acquire F.H. Bertling Limited at a time when the business was facing criminal prosecution and was making no external sales. Regardless, despite the acquisition, it appears that F.H. Bertling Limited has not completely severed ties with its former parent company. Marianna Heinemeier – whose family has run the Bertling Group for over a century – is still listed as the sole director of F.H. Bertling Limited, although a spokesperson told Corruption Watch that her continued involvement with the former UK subsidiary is temporary.  

 

It also appears that the Bertling Group is doing exactly the same type of work in the UK despite offloading its convicted London-based subsidiary. This is made explicit in F.H. Bertling Limited’s 2016 annual report in which the subsidiary states that it was in the process of transferring its contracts to other parts of the Bertling Group before being wound down.

 

Indeed, Colin Mcisaac and Julia Burt - who were the sole directors of F.H. Bertling Limited for several years until 2016 when Heinemeier took over - are still employed in the UK. They now lead the Bertling group’s Aberdeen subsidiary, which like its former London counterpart sells freight forwarding services to UK energy companies. As F.H. Bertling Limited’s fortunes have dwindled, those of the Aberdeen subsidiary have soared. In 2016, F.H. Bertling Logistics Aberdeen Limited saw its revenue increase by over 70 per cent.

 

Much of the Aberdeen subsidiary’s revenue comes from a contract previously fulfilled by F.H. Bertling Limited to provide transport and logistics services to the multibillion dollar Tengizchevroil joint venture between Chevron and the government of Kazakhstan. The Aberdeen subsidiary is using former F.H. Bertling Limited staff to fulfill the contract as well as the same London office where the convicted company was based. In fact, London, not Aberdeen, remains the main site of Bertling’s UK operations.

 

Corruption Watch asked Chevron why it continues to do business with Bertling’s Aberdeen subsidiary despite the fact that it is in many respects the same as corruption-convicted F.H. Bertling Limited. A spokesperson for the company replied: “Chevron abides by a stringent code of business ethics, under which we comply with all applicable laws”.

 

That the Bertling Group seems to be continuing as before in the UK, highlights one of the weaknesses in the UK’s debarment regime when it comes to holding large companies with complex corporate structures to account. The Bertling Group has over 100 subsidiaries; it matters little if one of its subsidiaries faces debarment, the parent company can simply bid for new contracts and continue doing the same work using another part of the group.

 

Of course, one way around this problem is to prosecute the parent company rather than the subsidiary. It is unclear whether the SFO, which continues to investigate Bertling, intends to take action against the parent. In the Angola strand of the investigation at least, the SFO does not face the obstacle that often prevents prosecutions of large companies under the UK’s outdated corporate criminal liability laws: a lack of evidence that a senior employee, usually one who sits on the board of the ultimate parent, intended for the wrongdoing to occur. Unusually for a corruption case, the SFO uncovered emails sent by top directors of the Bertling Group openly discussing bribery.

 

All change at the top?

 

In Hamburg where the Bertling Group is headquartered, it also appears that things are continuing as before. The group has been slow to clean up its top-level management despite repeated public allegations of corruption by the SFO. In particular, Jürgensen has stayed on as one of several directors of the parent company as well as being a shareholder in the business. 

 

More worrying still, the Bertling Group has not been forthcoming about the role that Jürgensen, who was convicted in March, plays at the company. In September, the Bertling Group put out a statement on its website that said: “None of the accused [in the SFO case] currently work for Bertling Logistics”.

 

A spokesperson later clarified via email that the online statement - despite being the only response on the Bertling Group website to the company’s guilty plea - just applied to the arm of the business that deals with logistics.

 

The spokesperson added that Jürgensen is not a director in the logistics arm of Bertling, which generates the majority of the group’s revenues. However, this is directly contradicted by a German company registry filing that lists Jürgensen as a director in F.H. Bertling Logistics Holding GmbH. When presented with the filing, the spokesperson conceded that Jürgensen served as a director in the logistics company, but insisted that neither Jürgensen nor the company play an active, “operational role” in the logistics division.

 

Jürgensen is not the only individual implicated in the SFO’s investigation to have stayed on at Bertling. As previously mentioned, Heinemeier - who is listed as an alleged co-conspirator on the SFO’s indictment - serves as the sole director of the convicted UK subsidiary. Heinemeier, who, unlike her alleged co-conspirators has not been charged and will not face prosecution, is also one of the current directors in the ultimate parent company.

 

It appears that the Bertling Group is struggling to clear out the skeletons in its closet. With a convicted individual and an alleged co-conspirator in top-level positions, it is questionable whether the company is able, and willing, to move forward. 

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