Smith & Ouzman sets out to rebuild reputation
Monday, January 25, 2016
It was the call every company director, involved in exports, hopes never to get – in 2010 Smith & Ouzman (S&O) was informed it was under investigation by the Serious Fraud Office (SFO) – an investigation which turned into a prosecution and, ultimately, a series of convictions.
Nearly six years’ later the security printer has been fined £1.3m and hit with £881,158 in confiscation fees and £25,000 in costs after being found guilty of bribing officials in Africa to secure contracts to print ballot papers, along with the company’s former chairman Christopher John Smith and sales director Nicholas (Nick) Smith, following a four-year investigation and six-week trial.
Christopher Smith was sentenced to 18 months’ imprisonment suspended for two years, 250 hours of community work and a three-month curfew, while his son Nick Smith was jailed for three years. They were each banned from being company directors for six years and resigned as directors of S&O on 31 December 2014. After 60 years of partnership between the two families, there are now no Smiths running the historic business, although Smith senior still owns shares.
They had paid £395,074 to foreign public officials in Kenya and Mauritania, adding the costs of the bribe to the pricing, in what Judge Higgins sitting in Southwark Crown Court called “cynical, deplorable and deeply anti-social”. He said the effect of damaging confidence in electoral systems could be catastrophic and “lead to violence and loss of life”.
He described the “casual” payment of bribes between 2006 and 2010 as routine and “standard operating procedure” and said the Smiths had compartmentalised the crimes from “otherwise exemplary lives”, not to seek personal gain but to do all they could for their company. The bribes secured contracts worth just over £2m.
“Before these crimes, you were men of good character,” he added. “There is an element of tragedy about this case.”
The investigation came hot on the heels of the Bribery Act 2010, which created a new offense of commercial organisations failing to prevent people associated with them from bribing another person on their behalf. This caused much debate at the time about how widespread such an offence could be since corruption is endemic in certain countries.
A difficult time
Chairman Phil Ouzman, the third generation of his family to work at the firm, says the company “willingly” provided information and attended interviews at the SFO. Once the trial started it also held a series of meetings with customers to explain what was happening.
He says it was a tough time for the Eastbourne, East Sussex company, founded in 1845.
“I think people were worried, it was a difficult time, but our workforce have been really supportive and very understanding with regards to the case and I can’t speak highly enough of them.”
When the prosecution – the first of a UK company under the new law – was launched, the printer was thrust into national and international news in what was dubbed “Chickengate” by newspapers (‘chicken’ was used as a euphemism for ‘bribe’ in email correspondence).
Smith & Ouzman quickly lost business. Profits plummeted from £4m to £400,000 and fell 37% to £15m in the financial year to 31 December 2014. Details for 2015 are not yet available.
But despite this dramatic drop in fortunes, the company did not lay off any staff. Neither did it consider changing its name.
“The business has always been structured to be resilient and profitable,” Ouzman says.
One saving grace is that the company can pay the £2.2m fine in installments over five years.
“Clearly it’s a significant amount of money but equally the judge was perfectly clear he didn’t want to destroy the company,” he says.
“We forecast an increase in sales next year in double figures. We are very confident in our future.”
In 2010, the company decided to work towards British Standard 10500 for anti-bribery management, which it achieved in September 2014.
“We took a decision to be very active and update our procedures and policies,” Ouzman says.
“It didn’t take long to put everything in place. We would’ve been ready in 2011, but it took a while to find a suitable auditor.”
Ouzman says the company would have done this anyway in response to the new legislation, regardless of SFO interest.
In fact Nick Smith was instrumental in this process, Ouzman says.
Along with the new accreditation came the need for a full-time compliance officer.
“We continue to explore contracts worldwide, but we don’t work in Kenya or Mauritania,” Ouzman says, “and now we always do a risk assessment.
“I agree with the judge that it’s a tragedy. I would say that for other companies that have any intention of trying to secure contracts abroad, the BS 10500 accreditation is the best place to start. It ensures you undertake due diligence. Every process is scrutinised.”
Smith & Ouzman has also undertaken a full review of its business, developing a range of non-print products, such as apps, web portals and online verification systems to complement its traditional offering.
“We’ve been concentrating on digital offerings away from print in conjunction with leading print brands. We just started approaching the market with these new products but we can quite easily see us reaching 15% of our turnover with them.
“We would be foolish not to address the changes in the market.”
The company is also investing, taking delivery of a new digital printer in December, although Ouzman will not reveal which one.
“What happened, it’s historic,” he says. “We are a completely different company now.”
Ouzman, who was production director at the time the offenses were committed, says he is relieved to “get back to the business of doing business” after five years of uncertainty.
“We relied on the two gentlemen in charge of sales to do their job professionally and it’s been found, with regret, that they didn’t,” he adds.
“It’s not for me to say what they did. We’re pleased that the particular event is finished with and we can look forward and take the company forward.”