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Who will catch the medium fish in foreign bribery cases?

November 20, 2017


Photo Credit: Dave Conner on Flickr (CC BY 2.0) 


 The remit of the Serious Fraud Office (SFO), with its blue-chip targets and multi-million pound investigations, has always been to tackle the big fish – the high-end fraud and corruption cases. The under-resourced SFO is simply unable to take on the middle to low tier stuff, posing the question: who is responsible for going after mid-range foreign bribery?


Until two years ago, the City of London Police’s Overseas Anti-Corruption Unit (OACU), was responsible for tackling just this end of the spectrum of foreign bribery. The remit of the unit, which was set up in November 2006 with funding from the Department for International Development, was passed in May 2015 to the International Corruption Unit (ICU) at the National Crime Agency (NCA). Originally, the idea was for OACU to move lock stock and barrel into the ICU, but its investigators refused to go.  As a result, OACU was asked to finish off its existing cases while the ICU had to start from scratch, recruiting new staff to investigate foreign bribery.


As OACU sends its final case file to the Crown Prosecution Service on its last investigation, it is worth pausing to reflect on the nature of the cases it has taken. These cases might not be headline grabbing stuff and often go largely unrecorded in the mainstream media due to lack of name recognition. But they involve corruption that is just as deadly and just as important to tackle.


A clear-cut example of the often under-reported, but vitally important nature of the OACU’s work can be seen in the unit’s last case, which centres on allegations that a British company, CAS-Global, paid bribes to facilitate the transport of decommissioned gunboats from Norway via the UK into the hands of a Nigerian warlord. Corruption Watch has written extensively about the lax UK export controls that allowed this to happen. 


CAS-Global aside, OACU investigations were behind half of the foreign bribery cases to have resulted in convictions in 2017. In fact, over the years the unit has been good value for money receiving around £10 million in funding since 2006, which is less than the sum set aside for some of the more complex SFO investigations. In return, OACU has helped secure 8 convictions of individuals, one of which was the result of a joint investigation with the SFO. This accounts for more than a third of the individual foreign bribery convictions in the UK since 1999. The unit also helped the SFO investigate UK publisher Macmillan, which in 2011 entered into a £11 million civil recovery settlement.


Politicians have been quick to recognise the value for money provided by the OACU. Speaking in December 2013, Labour MP Catherine McKinnell said: “For every pound invested in that unit (OACU), Her Majesty’s Revenue and Customs retrieves between £10 and £30 from the clutches of shell companies and returns it to the UK public purse. In times of austerity, the government should clearly be prioritising areas of work that provide such good value for money.”


The OACU’s two cases this year are good examples of the kind of medium size investigation that the unit specialised in, going after individuals engaged in corruption schemes that severely inhibit growth in poor countries. Both cases involved corrupt officials at international development banks who took millions of pounds in bribes.  Wassim Tappuni, who was sentenced to six years at the end of September, served as a consultant for the World Bank, while Andrey Ryjenko, who was sentenced in June, also for six years, worked at the European Bank for Reconstruction and Development (EBRD) where he corruptly approved loans for projects, including a methanol plant in Azerbaijan backed by former Prime Minister Tony Blair.


A bribery scheme orchestrated from a sleepy London suburb


Tapunni’s case was the less publicised of the two, but has had perhaps the greater impact, sparking criminal investigations in six different countries as well prompting the World Bank’s sanctions board to discipline at least eight companies.


Tappuni, who worked from home in the London suburb of Kingston, served as an expert consultant overseeing the World Bank-financed procurement of medical equipment by less economically developed countries, including Albania, Romania, Uzbekistan and Iraq.


Between April 2008 and June 2013, Tappuni received 65 bribe payments totalling just under £1.7 million from medical equipment companies bidding for contracts worth over £40 million. In return for the bribes, Tappuni offered “favours” to the companies, including handing over confidential drafts of bidding documents and helping discredit the competitor bids.


Tappuni’s bribery scheme was not the most elaborate. Generally Tappuni would issue a bogus invoice to the medical supply company in question and the bribe would be paid to a Swiss bank account controlled by Tappuni.


In certain cases, especially those involving German companies, Tappuni used Anton Schlenger, who at the time worked for Phillips Healthcare in Hamburg, as an intermediary to both contact bidding companies and collect corrupt payments. UK authorities wanted to extradite Schlenger, but were unable to do so as there is an ongoing German investigation.


During the trial of Tappuni over the summer, details emerged about just how brazen the former World Bank consultant had been. After being arrested in the UK in 2011 following a tip-off to City of London Police from Dutch authorities, Tappuni began communicating with his co-conspirators using the pseudonym, “jimmy”, and continued to receive bribes from two companies, Dutchmed and Nihon Kohden. The post-arrest bribes, which continued up until 2013, totaled some £200,000, and were collected by Schlenger as Tappuni’s accounts were frozen. 


Despite overwhelming evidence against him, Tappuni acted – in the words of the judge overseeing the case – with “self-righteous indignation”, often making the implausible claim that the bribes were in fact legitimate fees for “post-contract” work. Judge Peter Testar said there were grounds for consecutive sentences as Tappuni, who was convicted on 13 counts of conspiracy to obtain corrupt payments, continued the bribery scheme after being arrested. However, the judge refrained from imposing consecutive jail terms because of Tappuni’s old age and the fact that it was not part of the prosecution’s case that the bribery led to inferior bidders winning contracts.


Wire service MLex reports that criminal investigations into Tappuni’s corruption scheme are underway in:


  • Austria: authorities have opened an inquiry into medical equipment manufacturer Odelga Med and three individuals.


  • Romania: authorities are investigating Dutchmed executive Dick Van Halewijn.


  • The Netherlands: authorities are investigating Dutch medical-services company DRC’s payments to Tappuni.


  • Switzerland: authorities are looking at an unnamed individual for possible money laundering.


A number of companies accused of bribing Tappuni have also been sanctioned by the World Bank, including Karl Storz, Ideal Medical Products Engineering, Simed International, TOO Distrilab, Nihon Kohden Europe and Dutchmed.


A Russian corruption scandal in the heart of London


The other OACU case that came to court this year stood out not only for the egregiousness of the misconduct – the official in question accepted millions in bribes – but also for the host of shady characters, including MI5 agents and a corrupt novel-writing Russian banker.


Andrey Ryjenko, whose role at the EBRD (a taxpayer-funded multilateral bank based in London that over the years has been linked to numerous allegations of corruption) required him to vet loan applications from companies, faced trial at the Old Bailey this summer. He is accused of accepting $3.5 million in bribes between 2008 and 2009 from companies hoping to secure EBRD financing for projects in the Ukraine, Russia and Azerbaijan.


Businessman Dmitrij Harder, who ran the US-based Chestnut Group, collected bribes from companies seeking EBRD funding and passed them to Ryjenko. Harder, who pleaded guilty in April 2016 to violating the FCPA, paid the bribes into bank accounts belonging to Ryjenko’s sister Tatjana Sanderson. It was thought that the payments would attract less suspicion as Sanderson, who at the time worked at Standard Bank in London, earned more than her brother.


Citibank Jersey closed Sanderson’s account after she refused to explain details of one particularly large $2.5 million payment from Chestnut Consulting, telling compliance officials at the bank: “I am not going to provide you with anything.” Sanderson, whose £1.5 million Mayfair flat was seized by the NCA in 2016, did not stand trial alongside her brother because she was suffering from mental health problems.


Private Eye has written an in-depth report on the Ryjenko case, outlining in detail the three corruption schemes used by Harder to pay Ryjenko some $3.5 million in bribes:


  • Harder paid just over $1 million in four tranches to Ryjenko who in return secured EBRD approval for $85 million in equity funding and €90 million in loans for Irkutsk Oil between 2008 and 2009.


  • Privately-owned Azerbaijan Methanol Company (AzMeCo) paid Harder $70,000 which was split with Ryjenko. At the end of 2009, EBRD gave AzMeCo $120 million in funding for a methanol plant in Azerbaijan. Around this time the company also reportedly gave Tony Blair tens of thousands of pounds to endorse the plant, although it is not known if this money came from EBRD funds. The EBRD cancelled its loan to AzMeCo in 2010 because of a “lack of progress in financial due diligence”.


  • By far the largest bribery scheme involved UK oil and gas business Vostok Energy, which received a $100 million EBRD financing package in 2009. Vostok, which produces oil and gas in Russia, paid just under $5 million to Harder who passed on around half to an HSBC account belonging to Ryjenko’s sister. 


In 2013, the former CEO of Vostok Alexander Capelson pleaded guilty in London for paying $200,000 to another EBRD employee, Elena Kotova, who formerly served as Russia’s top representative at the bank. An EBRD internal investigation, which was carried out by the former head of the US Department of Justice’s FCPA unit Mark Mendelsohn, found that Kotova had solicited over $1.7 million in bribes during 2009 alone.


Private Eye reports that Kotova, who now writes novels after receiving a suspended corruption sentence from a Moscow court, was under surveillance by MI5 during her time at the EBRD over links to an alleged Russian spy. MI5 also reportedly made numerous attempts to persuade Ryjenko to provide information on the spy who was working under diplomatic cover in the UK.


Taking up the slack: the NCA's ICU


As the Ryjenko and Tappuni cases illustrate, the OACU, which at its peak could call on around 12 specialist foreign bribery investigators, played an important part in the UK’s anti-corruption ecosystem. It is now up to the NCA’s ICU to fill the gap left by the demise of the OACU.


The ICU was set up just under two-and-half years ago, combining the remits of the NCA’s Kleptocracy Unit and Sanctions Unit and as well as the OACU, and the Metropolitan Police Proceeds of Corruption Unit. According to the most recent OECD report on UK foreign bribery enforcement, the ICU has 45 individuals doing corruption work of which 30 are frontline investigators. However, the unit has no dedicated foreign bribery investigators - instead officials move between different types of case, including asset recovery and corruption-linked money laundering.


It’s difficult to assess how the ICU has done in the two-and-a-half years since being set up – its activities, including arrests are generally kept under wraps. The NCA announced that it had arrested five individuals in October 2015 – which press reports linked to former Nigerian oil minister Diezani Alison-Madueke – but apart from this there has been little information in the public domain.


The ICU told Corruption Watch in November that it has 15 active foreign bribery investigations. This is very encouraging as the most recent OECD foreign bribery report listed only one ongoing ICU foreign bribery case. However, the unit is yet to secure a conviction - the time-consuming nature of overseas corruption investigations must be taken into account here. By way of comparison the OACU secured its first overseas corruption conviction two years after being set up in November 2006, but further charges were not brought until 2010.


The NCA is focusing some of its efforts on “disruption” by using mechanisms like freezing orders to disrupt illicit financial flows and force corrupt individuals to take their money out of the UK financial system. Disruption is an important strategy, but it must be coupled with an emphasis on criminal prosecution and asset recovery to ensure that corrupt individuals and companies are held to account for their actions and deprived of their ill-gotten gains. As the last OACU case looks set to come to court in 2018, the ICU now needs to ensure that it is feeding prosecutors a steady stream of foreign bribery cases over the coming years.


The ICU’s place in the anti-corruption ecosystem is just as important as the SFO’s. The SFO, with its big-name cases such as ENRC, Airbus, Unaoil and Rolls-Royce, takes up the bulk of the anti-corruption commentariat’s column inches, so it is easy to forget just how damaging and deadly mid-level foreign bribery, of the kind investigated by the ICU, can be. The past roster of OACU cases - which include corrupt bank officials operating in the heart of London’s financial district and alleged bribe schemes to move gunboats across borders – show clearly the insidious effects of corruption at all levels, not just at the largest scale. It is vital then that the ICU makes sure that corrupt individuals and companies, no matter their wealth or size, face a very real prospect of prosecution.  

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