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18 December 2017
On July 11 2017 the Serious Fraud Office (SFO) announced that it had opened an investigation into the oil services company Amec Foster Wheeler Plc and any predecessor companies owning or controlling the Foster Wheeler business. The company had already informed its shareholders that it had been asked to provide information in relation to the SFO's investigation into Unaoil in May. Amec had acquired its US competitor Foster Wheeler for $3.3 billion in 2014.
Amec itself had been subject to a £2.2 billion takeover bid from the Wood Group at the time, which was completed in October 2017, and the SFO's announcement came just weeks after the proposed acquisition was approved by shareholders of both companies.
The Wood Group had previously disclosed that it was carrying out an internal investigation into its own past dealings with Unaoil.
The SFO's announcement was considered unlikely to endanger the takeover; however, its occurrence mid-transaction highlighted the need for any company purchasing another entity which operates in higher-risk jurisdictions or sectors to consider white collar crime issues. Both the seller's and purchaser's counsel will have had to re-examine the disclosure that was made in due diligence (including historical mergers and acquisitions due diligence) and the terms (eg, material adverse change clauses and the price) in light of the news. Notably, Amec's share price fell by 10% when the announcement was made.
Another difficulty that the buyer may have encountered is how Amec dealt with the investigation. The Wood Group may not have been entitled to all of the information relating to the investigation held by Amec, and may not have been entitled to engage with the SFO as it did not own Amec at that time and was therefore not party to substantial information relating to the asset that it was about to purchase.
Later in July 2017 the SFO announced that it had opened an investigation into the Rio Tinto mining group.
The SFO's announcement came after Rio Tinto had, in November 2016, disclosed the fact that it had commenced an internal investigation into suspected bribery and corruption and is believed to have submitted a formal self-report to the SFO.
The internal investigation was triggered by the August 2016 discovery of emails dating from 2011 which referred to a $10.5 million fee paid to a consultant, Francois Polge de Combret, for advice on the Simandou iron ore mining project in the Republic of Guinea. It is alleged that Combret may have links to Guinean Government officials. The emails were reportedly discovered by Rio Tinto's external counsel while conducting work in respect of a commercial legal dispute relating to the company's Simandou operations.
Rio Tinto dismissed its chief executive of energy and minerals, Alan Davies, and terminated the contract of its head of legal and regulatory affairs, Debra Valentine, in the wake of the revelations.
The SFO's Guidance on Corporate Prosecutions states that self-reporting can be taken into account as a factor tending against prosecution, provided that it is part of a genuinely proactive approach adopted by the corporate management team. As the investigation develops, it will be interesting to see whether the SFO will consider Rio Tinto's remedial actions sufficient to take into account when deciding whether to prosecute – especially since some media outlets have speculated that there was a significant delay in Rio Tinto referring the suspected wrongdoing to the SFO. Publicly, the company has said that it will co-operate fully with the SFO.
In August 2017, one month after opening its investigation into Rio Tinto, the SFO announced that it would investigate corruption allegations against British American Tobacco Plc (BAT). Although the SFO did not give any further details, the tobacco giant had announced in February 2017 that it was investigating claims that it had bribed officials in East Africa to undermine anti-smoking laws. This followed statements made in late 2015 by a former BAT employee, Paul Hopkins, who had claimed that he had paid bribes on the company's behalf in order to hinder the implementation of anti-smoking legislation in Kenya. BAT has committed to co-operating with the investigation.
Despite this, whistleblowers clearly play a central role in publicising wrongdoing and the resulting commencement of investigations. Businesses should have effective whistleblowing policies in place so that allegations of wrongdoing can be reported to the authorities and investigated in a thorough and efficient manner.
For further information on this topic please contact Kathleen Harris, Sean Curran, Oliver Cooke or Melissa Dames at Arnold & Porter Kaye Scholer LLP by telephone (+44 20 7786 6100) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Arnold & Porter Kaye Scholer LLP website can be accessed at www.apks.com.
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