Adequate Procedures or PR Stunt?

Adequate Procedures or PR Stunt?

15 January 2015

By Sue Hawley

On 20 December 2014, just as the trial of its Directors and itself as a company was coming to a close, Smith and Ouzman posted on its website a news article stating that it had been awarded, in September 2014, the BS10500 – the relatively new anti-bribery management certification developed by the British Standards Institute. This standard was developed with industry experts in response to the UK Bribery Act 2010.

Smith and Ouzman claimed to have had the right procedures in place since 2011 but that it was only in 2014 that one could become certified for the anti-bribery standard. “We were well placed“, the company said in its posting online, “to be at the front of the queue when accreditation audits became available.”

It is normal for a company facing an SFO investigation to seek to distance itself from the activity under investigation and show that it has moved on.  There are several reasons for doing so:  mitigation of the fine the company might receive, and as importantly, trying to show that the company has changed enough to be eligible to tender for public contracts – or “self-cleaned” in EU Procurement speak. Under the latest EU Procurement rules, a company must have self-cleaned if it is convicted of corruption to be eligible for public contracts in the EU.

But there are several things seriously wrong with Smith and Ouzman’s anti-bribery certification. Firstly, Smith and Ouzman’s certification was provided by a company, CQS (Certified Quality Systems),which is controversial in other fields of certification for its lack of certification by UKAS (the UK Accreditation Service). UKAS is the only national accreditation body recognised by the government and under EU law. Under international standards for accreditation, applied by the most respected international body, the International Accreditation Forum (IAF), it is an essential tenet that organisations that certify should not also provide consultancy to companies they are certifying. This is to protect the independence of the certification. CQS does not meet that standard in many areas of its certification as it provides both consultancy and certification, and it is doubtful whether it would be able to get UKAS or indeed IAF accreditation as a result. The Department for Business, Innovation and Skills warned in 2012 that companies not accredited by UKAS may, under EU regulations (EC/765/2008), be guilty of an offence under the Business Protection from Misleading Marketing Regulations 2008.

The BS1500 is a new standard and current there is no UKAS accreditation scheme for it. While there is therefore nothing technically wrong with Smith & Ouzman’s certification by CQS, questions must be raised to whether CQS has applied the rigorous standards required by bodies accredited by the International Accreditation Forum, and whether its certification can be regarded as independent if CQS has also been providing consultancy for the company.

Secondly, it is simply incorrect for Smith and Ouzman to say that it was at the front of the queue when accreditation audits became available. Mabey Bridge was the first company to be awarded the BS10500 standard back in 2012 by LRQA (a company that has accreditation from UKAS for those standards that have UK accreditation schemes, and from many other national accreditation bodies). They took a very different approach to Smith and Ouzman. Mabey Bridge, formally Mabey and Johnson, pleaded guilty to corruption in September 2009, having cooperated with the Serious Fraud Office and handed over documents voluntarily. Crucially, in July 2008, after the SFO opened its investigation, four of its Directors resigned. Three executives of the company including two Directors went on to be successfully prosecuted for overseas corruption in February 2011.

The key and final point is that Smith and Ouzman, unlike Mabey Bridge, contested the charges against them. They failed to cooperate with the Serious Fraud Office who had to use Section 2 powers to get documents from the company. Their Directors who were under investigation did not resign or step aside when the SFO filed charges in October 2013. Indeed, they did not resign until a month after conviction. There is little real sense in which the company can be said to have faced up to the corruption charges and taken adequate steps to move on. Under the “self-cleaning” provisions of the EU Procurement rules, a company must have “clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities”, and taken “concrete …personnel measures that are appropriate to prevent further criminal offences or misconduct”. The company does not appear to have done either.

The danger is that Smith and Ouzman’s BS10500 will get wielded in court to make the company look as if it has moved on. It will get brought out every time the company tenders for a public procurement contract to make it look as if it has “self-cleaned”. And it will be used, should the company ever engage in bribery again, to defend itself under the Bribery Act by proving it has adequate procedures on bribery in place.

The case shows the real dangers of unregulated certification. It also seriously threatens the credibility of the BS10500 standard.  BS10500 claims to be the gold standard when it comes to adequate procedures for anti-bribery management but in the Smith and Ouzman case it looks as if it has been dangerously reduced to a PR stunt. The UK Accreditation Service should urgently look into developing an accreditation scheme for the BS1500 so that bodies awarding the standard are known to be, and monitored for being impartial, rigorous and independent.

On 9th January 2015, Corruption Watch wrote to CQS, copying in the BSI, to raise its concerns about CQS’s award of the certificate and demanding that the certificate be removed. The letter can be seen here