Grocery trade cannot afford to be complacent about bribery

The sports cars, yachts, luxury hotels and cash-stuffed bags enjoyed by John Maylam, the former Sainsbury’s potato buyer who was jailed with two employees of supplier Greenvale for defrauding the retailer out of £4.9m last month, are an extreme example of corruption in grocery. But it seems this is not an isolated case.

A staggering 47% of respondents to a poll carried out by The Grocer say they’ve known salespeople to offer retail and wholesale buyers bribes. Thirty nine per cent say they’re aware of buyers who have asked for backhanders. And it seems new legislation introduced to stamp out corruption has had little effect. On the anniversary of the new Bribery Act passed last July, 25.8% say bribery and corruption is more frequent in the industry than before, while 51.6% say there are still ways and means to get away with personal incentives and 12.5% reckon it’s still easy.

Respondents report buyers being offered or requesting everything from seemingly innocuous corporate hospitality - tickets for concerts and sporting events, expensive dinners - to holidays, cars, cash, strip club trips and even prostitutes. So with the Bribery Act making companies - not just individuals - potentially liable for corrupt practices within their organisations, could we soon be seeing a major retailer in the dock? And where does the new legislation leave the good old corporate jolly?

“It’s reasonable to ask whether this is a high-risk sector,” says Tom Ellis, a partner at law firm Wragge & Co specialising in bribery and corruption. “If the retail sector is one where there’s a mixture of high-value contracts being awarded, informal relationships between buyers and sellers, and excessive hospitality, then you have a real risk of a culture that increases the risk of bribery and corruption.”

The Sainsbury’s case shows just how great the risks are. The retailer estimates it was overcharged £8.7m for potatoes, particularly Charlotte and baking varieties, supplied by Greenvale between July 2005 and July 2007. Greenvale’s accounts show that £4.9m was moved into a bank account used by John Maylam and Greenvale account director David Baxter to fund a lavish lifestyle, which included yacht trips in the Channel Islands, a £350k trip to the Monaco Grand Prix and a 137-night stay at Claridge’s when Maylam ran up a £200k bill.

“A clandestine prostitute was provided on a US buying trip - the buyer didn’t know she was being paid by the supplier”

Anonymous industry source

Maylam, who also treated himself to a £93k Aston Martin V8 Vantage with his ill-gotten gains, got four years after admitting corruption. Baxter, who also admitted the corruption charges against him, was sentenced to 30 months behind bars and Greenvale finance director Andrew Behagg was jailed for three years after being found guilty of corruption at an earlier hearing for authorising the payments to Maylam.

If the offences had happened today, Sainsbury’s board members could have found themselves answering tough questions in court, say legal experts. “It’s reasonable to have expected someone at Sainsbury’s to ask why a buyer of theirs was enjoying £200k stays at Claridge’s,” says James Thompson, a partner at law firm Wardhadaway. “This was on such a vast scale that if it had happened today it’s entirely possible the Serious Fraud Squad would have asked how they didn’t detect it, and conclude that Sainsbury’s procedures weren’t good enough. Clearly Sainsbury’s could have ended up being prosecuted.”

As yet no companies have been prosecuted under the Bribery Act for failing to prevent bribery in their organisations. But it’s only a matter of time. “Companies in this sector and indeed all companies need to carry out a robust assessment of the risks that are attached to its organisation, the markets it operates in and the sorts of arrangements it enters into with third parties,” says Ellis. “That assessment must be led from the board down.”

It must also include analysis of the kind of activities that in the past might have been dismissed as ‘perks of the job’. According to the Act, all corporate hospitality should be ‘reasonable and in proportion’ and not ‘excessive or lavish’. That means keeping a closer eye on the kind of perks being enjoyed by staff, says Ellis. “My recommendation is that companies have a clear and practical corporate hospitality policy, which everyone understands and knows about.”

While all of the big four say they have policies in place to avoid bribery and corruption taking place in their supply chains, experts point out that this doesn’t necessarily go far enough. “The law says you have to have a policy in place to control the risk of bribery and corruption, but it is absolutely meaningless if it is not policed,” says Thompson. “If you are failing to do that, you are edging closer to getting prosecuted.”

A US probe into allegations that Asda owner Walmart made bribes worth $24m in Mexico prompted Walmart to announce a new policy last month in which corruption claims will be escalated to senior board members and closer scrutiny will be given to its operations in developing markets.

But even those without the resources of Sainsbury’s or Walmart should be taking notice, says John Burbidge-King, CEO of risk mitigation consultancy Interchange. “I’d call on all companies - big and small - to, at the very least, go to the Ministry of Justice’s website and look at the Bribery Act and benchmark against the advice they give,” he says. “The Sainsbury’s case should be a huge wake-up call to everyone.”

And if the Sainsbury’s case isn’t enough to set alarm bells ringing, perhaps the findings of our survey will be.