In the last week, there have been three reported matters which demonstrate the material consequences that Australian companies and individuals may face as a result of involvement in corrupt conduct. These include:
- the first reported sentences for conspiracy to bribe a foreign public official;
- the World Bank banning subsidiaries of an Australian company due to evidence of inappropriate payments; and
- US indictments of a Sydney-based individual for alleged payments to secure IT contracts in Australia.
A brief overview of each matter is provided below. These matters provide a timely reminder for companies to ensure that their policies and procedures are adequate to prevent and detect corrupt conduct within the organisation.
First reported sentences for conspiracy to bribe a foreign public official
R v Jousif; R v I Elomar; R v M Elomar  NSWSC 1299
On 27 September 2017, three individuals were each sentenced to 4 year terms of imprisonment for conspiring to bribe a foreign public official pursuant to the Criminal Code 1995 (Cth). Two of those individuals (the Elomars) also received a fine of AUD 250,000.
The Elomars were directors and equal shareholders of Lifese Pty Ltd, an Australian company involved in engineering, infrastructure and construction projects in Australia and overseas. The third defendant, John Jousif, was an Australian resident and Iraqi citizen. He was a relevant intermediary "with expertise in introducing companies to government and statutory authorities in Iraq and the protocols associated with obtaining contracts with such bodies." He and his colleagues approached Australian companies to do business in Iraq.
Between 2013 and 2014, the Elomars paid USD 1 million in cash to Jousif who then remitted the money to Baghdad for the purpose of paying a bribe. Lifese was never awarded any contract in Iraq and there was no evidence that the USD 1 million remitted to Iraq was actually paid to any Iraqi official.
The Elomars and Jousif pleaded guilty to the offence of conspiring to bribe a foreign public official. In sentencing, Justice Adamson rejected the submission that bribery was necessary to do business in Iraq and imposed a custodial sentence on the Elomars and Jousif due to the seriousness of the criminal conduct and the need to deter others from engaging in bribery. Her Honour also imposed a fine on the Elomars as an additional deterrent in the commercial context.
World Bank bans Australian company's subsidiaries for "inappropriate payments"
On 28 September 2017, the World Bank announced a Negotiated Resolution Agreement (NRA) that debarred 5 subsidiaries of Australian-based engineering firm, SMEC Holdings Pty Ltd, after evidence indicating "inappropriate payments" was revealed in a World Bank investigation.
The subsidiaries were debarred for misconduct in the South Asia region for a period ranging between 6 months to 30 months. The investigation found evidence indicating inappropriate payments made in relation to World Bank-financed projects in Sri Lanka and Bangladesh.
Under the NRA, the parent company has committed to make "any necessary enhancements to its group-wide corporate integrity compliance program" to ensure consistency with the World Bank's Integrity Compliance Guidelines.
Entities debarred for more than 12 months may qualify for cross-debarment by other Multilateral Development Banks pursuant to the 2010 Agreement for Mutual Enforcement of Debarment Decisions.
US indictments in connection with alleged private bribery for Australian contracts
Sydney-based, former Commonwealth Bank executive, Jon Waldron, and US-based former contractor to the bank, Eric Pulier, have been charged in the US with fraud and conspiracy, and Pulier faces additional charges for alleged bribes. The charges relate to payments allegedly made to secure IT contracts for the bank.
Pulier, the founder and former CEO of ServiceMesh, allegedly paid AUD 2.5 million of bribes to Waldron and another Sydney-based bank executive, Keith Hunter, in order to secure a AUD 10.5 million software contract for the bank.
Hunter has already been sentenced to 3.5 years imprisonment in Australia for breaches of section 249B of the Crimes Act 1900 (NSW). After being released in Australia, Hunter is expected to be extradited to the US to face charges for conspiracy to commit securities fraud and wire fraud.
Waldron is also facing charges in Australia under section 249B of the NSW Crimes Act over the alleged payments and has pleaded not guilty.