In a stark warning to institutional investors, including, in particular, private equity investors, the Serious Fraud Office (SFO) for the first time obtained an order from the High Court recovering a dividend paid by to a shareholder of the convicted company under the Proceeds of Crime Act.
Mabey and Johnson Limited (M&J) was convicted at Southwark Crown Court in September 2009 for corruption and other charges. The civil recovery order relates to dividends in the amount of £131,201 paid to M&J’s parent company, Mabey Engineering (Holdings) Ltd (Mabey). The dividends were derived from contracts won through unlawful conduct. The civil recovery order in relation to the dividends was granted even though the SFO states that Mabey was “totally unaware of any inappropriate behaviour”. Richard Aldermann, Director of the SFO, emphasises that the SFO will vigorously pursue civil action against shareholders who benefitted from illegal activity.
Private equity investors and other institutional investors in companies are well advised to conduct thorough due diligence on the business practices of the companies they are considering investing in as the SFO will be “much less sympathetic to institutional investors whose due diligence has clearly been lax in this respect”.
Marlies Braun
