When does a prize become a bribe?

When does a prize become a bribe?



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Champagne, golf weekends, yachting trips, Las Vegas holidays; all have been offered in recent months by bridging lenders as competition prizes to reward their introducing brokers. 

Some have voiced concerns that such rewards may be perceived as incentives for business as quality brokers, with vast experience, are often considered a finite resource in bridging. Yet, it is vital that a broker remains impartial in a loan transaction in order to ensure the interest of the client is at the forefront of a deal. 

At a time that the regulator is beginning to take a closer interest in the bridging industry, and coinciding with the first anniversary of the date the Bribery Act 2010 came into force, we asked solicitor Tim Preston of

Lightfoots LLP, a civil litigation specialist, when exactly does a prize become a bribe?

Where do the authorities draw the line? The short answer is, nobody knows.

As you may well already know, the Bribery Act 2010 basically says that corporate hospitality and gifts to business contacts should be kept reasonable and proportionate and each situation turned on its facts. As the Act has not been in force long we, as yet, have no court decisions on what this means in practice. 

Accordingly, you may have heard or read occasional stories where business owners have said things like: 

“We could not invite our clients to the Olympics because it would have been against the Bribery Act.”

Yet, this merely means their legal advisers did not actually know whether it would have infringed the Bribery Act or not, but decided to play it safe.

I have heard that the government minister responsible for this area, Attorney General Rt Hon Dominic Grieve QC MP, when asked about this at a Chamber of Commerce event, said that the best rule to follow was that corporate gifts and hospitality would be acceptable if they would not cause embarrassment if made public. 

He considered that if the prize would be likely to cause embarrassment to those involved if made public then that was probably a sign that they were going beyond what is acceptable under the Bribery Act. However, this is still not a totally precise definition. It is also not strictly binding on the courts.

Currently, if a business asks me whether it can pay to take valued customers, suppliers or agents to a day at the races I say “yes”. If it asks me whether it can take clients to Paris or the Oktoberfest in Munich for a few days then I would ask for more information – it may be possible to justify spending thousands on hospitality where contracts are worth hundreds of thousands, if millions are at stake, or if what the client is doing is normal in their industry. 

If we apply this to the bridging industry, lenders should consider the below questions when offering prizes to their brokers:

1. Are there any illegal or unethical things brokers could be influenced to do by these prizes? 

2. If these ‘broker competitions’ are really just an alternative to a more conventional commission or bonus scheme by offering prizes - in the belief that it would catch people’s interest more than a monetary bonus - then there is probably nothing illegal in that. However, occasionally there possibly may be an issue as to whether the ‘prize’ of a holiday counts as a commission which the broker is obliged to disclose to his client. 

 

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