LEGAL & FINANCE : White Collar Crime Warning

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Byline: By John Duckers

Companies are at risk of being barred from public sector contracts if individual directors are convicted of white collar crimes A new piece of European legislation due to become law by January 31 could stop companies, and potentially their parent groups, from tendering if one of their directors, or others exercising authority, is convicted of offences such as corruption, fraud and money laundering.

The legislation may even mean that companies can be barred from bidding if a director was convicted of a crime whilst at a previous organisation.

Lawyers representing major corporations have expressed concern at the new EU regulations, which will have far-reaching effects on companies around Europe, and are asking the Government to adopt a sensible and proportionate approach to the new law.

Jeremy Summers, partner at national law firm Russell Jones & Walker, said: "This new legislation is alarming because presently it is open ended and, for example, could lead to companies losing out on major contracts because of a crime committed by a director or manager that has nothing to do with the company's business.

"The directives could therefore have a major impact on the UK's ability to compete for public contracts and, in a worst case scenario, put big companies out of business.

"Companies competing in the public sector and utilities markets are understandably worried by directives 2004/17/EC and 2004/18/EC which contain rules for these important contracts. Both stipulate that a candidate company for such contracts will be ineligible if it, or its directors, or others exercising control, have been convicted of criminal offences including corruption, conspiracy, fraud and money laundering.

"While this might initially seem a reasonable prohibition it has the potential to impose a highly disproportionate penalty on major companies that bid for these projects. …