Three jailed in Australia’s second foreign bribery prosecution

On 27 September 2017, the NSW Supreme Court delivered a landmark sentencing decision, punishing the first individual offenders under Australia’s foreign bribery offence. John Jousif, Ibrahim Elomar and Mamdouh Elomar - who pleaded guilty to the offence of conspiring to bribe an Iraqi official - were each sentenced to four years jail with a non-parole period of 2 years. A fine of $250,000 each was also imposed on Ibrahim Elomar and Mamdouh Elomar.

This is only the second prosecution of foreign bribery in Australia.

The Honourable Michael Keenan MP, Minister for Justice and Minister Assisting the Prime Minister on Counter Terrorism, issued a media statement on 27 September 2017 in which the Minister said that:

“The Government takes a zero tolerance approach to corruption in all its forms. Foreign bribery distorts international competitive conditions resulting in an inefficient allocation of resources and economic distortions.”

Since July 2016, the Coalition Government has provided $14.7 million in funding over four years to the Australian Federal Police (AFP) to bolster its foreign bribery capacity. The AFP is currently undertaking 23 active foreign bribery investigations.

The sentencing decision provides an insight into the approach the courts will take in addressing foreign bribery. This briefing provides a summary of that decision.

Click here to see more about what we can learn from Australia’s second foreign bribery case.

What did the Elomars and Jousif do?¹

The Elomar brothers were directors and equal shareholders of Lifese Pty Ltd (Lifese), a company involved in engineering, infrastructure and construction projects both in Australia and overseas. Around 2013, the turnover of Lifese dropped significantly due a mixture of the general decline in the Australia mining and construction sector and Mamdouh Elomar’s family circumstances, in which it became publicly known that one of Mamdouh’s sons had travelled to Syria to join ISIS and was subsequently killed there.

In 2013, Jousif approached the Elomars to suggest that they consider expanding to Iraq where substantial infrastructure projects were on offer. Jousif offered the Elomars the opportunity to secure a number of lucrative constructions contracts with the Iraqi government in return for commission on the value of each contract.  

Jousif and his contact in Iraq, were aware from the outset that the Elomars would be required to pay a bribe to obtain a government contract in Iraq. However, this information was not disclosed to the Elomars initially.

On 3 August 2014, Ibrahim Elomar and Jousif travelled to Iraq to meet with various Iraqi government officials. Shortly thereafter, Ibrahim Elomar signed a partnership contract between Lifese and Al Rasheed, an adjunct entity to the Ministry of Industry and Minerals. The contract did not provide for the payment of any money as a condition of its execution or registration. However, the contract was required to be provided to the board of Al Rasheed for certification, thereafter to the Iraqi Prime Minister’s office for approval and finally to the Minister for Industry and Minerals for confirmation.

Upon Ibrahim Elomar’s return to Australia, Jousif disclosed to the Elomars that US$100,000 was required to set up business premises in Iraq and a further US$1 million was required as a bribe to ensure that the partnership contract would be signed and certified by the Minister for Industry and Minerals.

The Elomars initially objected to paying a bribe but, after some pressure from Josif, consented to the payment. The Elomars and Jousif engaged in extensive discussions as to the method of transferring funds to Iraq due to sanctions imposed on the transfer of money directly from Australia to Iraq.  

The Elomars eventually provided Jousif with US$980,000 in cash which Jousif  transferred to Al Zubaidi in Iraq under the guise that the funds were donations “to help the Christian people of North Iraq”.

Following payment of the bribe, the partnership contract between Lifese and the Ministry of Industry and Minerals was signed and certified. The Elomars and Jousif were arrested and charged on 15 February 2015. No contracts were ever allocated to Lifese.

THE SENTENCING DECISION

The decision makes a range of comments about the detection and punishment of foreign bribery.

Why is foreign bribery so difficult to prosecute?

Her Honour rejected the argument that foreign bribery is a “rare” crime making the importance of deterrence somehow less significant. Her Honour found that general deterrence is especially important given the prevalence of Australian businesses working overseas on government contracts, including for substantial infrastructure.

“It is important that the sentence includes an element of denunciation so that those Australians who carry on business overseas appreciate that bribery of foreign officials is as serious and as criminal as bribery of local officials and can never be excused, much less justified, on the basis of a business imperative.”

Her Honour also commented on some of the difficulties in detection for foreign bribery investigators. The act of bribery often takes place in a foreign jurisdiction which impedes the AFP’s ability to gather evidence. Given the challenges of detection, it is also difficult to determine the extent that bribery takes place in any country. This can give foreign bribery the appearance of being a “rare” crime.

The AFP is reliant on telephone interceptions and whistle-blowers to detect foreign bribery. There is often an absence of real-time evidence which poses significant challenges for the prosecution to satisfy the elements of the offence beyond reasonable doubt.

Should bribery in Iraq be treated as less sinister than domestic bribery?

The sentencing judge rejected the argument that the bribery of a foreign public official in Iraq is considerably less serious than bribery of an Australian official. In doing so, her Honour considered the object and purpose of the Criminal Code in making bribery of foreign officials an offence in Australia. Her Honour noted that Division 70 of the Criminal Code implements the OECD Convention on Combating Bribery of Foreign Public Official in International Business Transactions (the Convention). Her Honour emphasised Australia’s obligations under the Convention to:

1. criminalise bribery of foreign public officials;
2. criminalise attempt and conspiracy to bribe a foreign public official “to the same extent” as attempt and conspiracy to bribe a local public official; and
3. criminal penalties to be “proportionate and dissuasive” and “comparable” to that applicable to local officials.

Her Honour found that:

“It could be argued that Iraq, having regard to its recent history, was vulnerable and lacked the controls and protections against corruption that may be available in other nation states such as Australia. Its need for infrastructure, having regard to the destruction caused by recent wars and unrest, may have made Iraq particularly susceptible to rent-seekers who were engaged to construct such infrastructure. If these matters were relevant, a conspiracy to bribe an Iraqi official could be regarded as more heinous than to bribe a Commonwealth official in Australia, where such conduct might be more likely to be detected.”

Ultimately, her Honour considered “it is not to the point whether corruption is thought to be more common in the nation where the foreign public official is located than in the jurisdiction which conducts the prosecution”.

What is the damage caused by bribery?

The offenders argued that since there was no evidence of what happened to the money after it was transferred to Iraq or whether it had made its way into the hands of an Iraqi public official, there was no damage resulting from the offence. Her Honour rejected the argument, finding that the damage was in the anti-competitive effect of crime.

“Bribery by its very nature tends to distort markets by giving a competitive advantage to the person who makes the most substantial bribe and tends to impede the assessment of tenders on any rational basis”.

Does the size of the bribe matter?

Counsel for the Elomars submitted that the amount of the bribe itself, having regard to the extent of work the company might have to undertake, should not be regarded as a very large amount. The sentencing judge rejected this submission and found that the US$1 million bribe was both substantial and significant since the Elomars considered the payment worthwhile to secure the prospect of future profits.

The sentencing judge similarly rejected the argument that the Elomars should be given more leniency because the payment of illegitimate money only occurred on one occasion. Her Honour held that the single payment was substantial and had been made after serious deliberation.

Endnotes

1. The facts of the case were agreed between the offenders and prosecution on the basis that the offenders pleaded guilty to the offence.