ILLICIT SECRET COMMISSIONS BILL. (Hansard, 20 April 1899)

§ *LORD RUSSELL OF KILLOWEN

My Lords, I rise to call your Lordships' attention to the pernicious practice of the gift and receipt of illicit secret commissions, and having done so, I shall ask your Lordships' leave to introduce a Bill dealing with the subject. I recognise that the responsibility rests upon me of satisfying your Lordships in the first place that this is a serious evil, and that it is of so grave a character as to justify and require a legislative remedy; and, in the second place, I have to satisfy your Lordships that the Bill which I propose for your acceptance, if it does not remove, will, at all events, offer a fair prospect of substantially diminishing the evil at which it is aimed. My Lords, this is not the first, nor the second, nor the third time that public attention has been called to this question. Bills, of a more or less incomplete or drastic character, dealing with the subject, have been introduced. As far back as 1877 "The Times" newspaper published an article, one passage from which I shall ask leave to read, in reference to the correspondence on the matter which had appeared in the columns of that journal, in the course of which it says:— First came solicitors, accused of betraying the trust of their employers, and leaguing with third parties to divide fees to which they had no sort of just claim. Then followed bankers, auctioneers, architects, insurance agents, and accountants. There does not seem, in short, to be any end to the ramification of this canker, which has grown to such a height as to threaten the extinction of honest plain-dealing altogether. It may be traced, indeed, through a much wider ramification than the correspondence we have published has as yet disclosed, and through all shades of question-ableness, from direct bribery of the most cor- 14 rupt kind, such as that of the architect or engineer, who receives douceurs from the contractors and tradesmen, whom he is bound to overlook, to the more venial, but still not justifiable, gifts or 'discounts,' or 'half-commissions,' which nominally unpaid agents, such as bankers, may receive from a broker. The article then proceeds to suggest that Parliament should deal with the matter by legislation. My Lords, again and again learned judges on the Bench have animadverted on the pernicious character of the evil to which I am referring, and, indeed, what has induced me to pay particular attention to it has been my own personal experience, largely professional, in part judicial, in the matter. Accordingly, I have been at some pains in drafting a Bill, in conjunction with Sir Edward Fry, a man known to this House as one who rendered distinguished judicial service to the country, and who, like a great many others, has been impressed by the necessity of doing something effective at least to mitigate the evil. The first point which I will deal with is whether the evil is really widespread and serious. There is within reach of your Lordships, if not in your Lordships' hands, a Report by the London Chamber of Commerce, whose efforts in this matter, and the trouble it has taken to obtain evidence, under circumstances of extreme difficulty, are worthy of all praise, and I might indeed almost justify my contention on this part of the subject by reading to your Lordships one or two of the conclusions of the Special Committee of the Chamber of Commerce:— Your Committee conclude from the evidence before them that secret commissions in various forms are prevalent in almost all trades and professions to a great extent, and that in some trades the practice has increased, and is increasing, and they are of opinion that the practice is producing great evil, alike to the morals of the commercial community and to the profits of honest traders. Bribes in all forms, including secret commissions, owe their existence sometimes to the desire of the donor to obtain the assistance of the donee; sometimes to the demand expressed or implied of the donee that the bribe shall be given. In the first class of cases your Committee have reason to believe that the bribe is often given unwillingly and with a pang of conscience, as the result of the keen competition in trade, and in the fear, too often well-founded, that unless given, other less scrupulous rivals will obtain an advantage; many cases have 15 come before your Committee in which traders have believed (often, though not perhaps always, without reason) that their entire failure to obtain orders has been due to the want of a bribe. The second class of cases are those in which the recipient extorts the bribe from those who have established business relations with his principal. This practice is rendered more effective and oppressive by a combination between the blackmailers. The servant or agent who demands a commission and fails to receive it, not infrequently warns his fellows in the same position in the trade against the honest trader, who thus finds himself shut out from dealings with a whole circle of firms. Then the Committee proposed to consider the question of dealing with the matter by legislation, and, although recognising the difficulty of doing so, urge the necessity of adopting legislative measures. I propose to read to your Lordships one or two of the illustrative cases set out in the appendix of this Report. A member of the Institute of Mining Engineers wrote: In some cases architects, engineers, and lawyers, in addition to their professional fees, expect a fee or payment in some form from builders, contractors, and investment companies. They are bound to pay them, or go without further orders. The only way to stop the pernicious practice is for the large professions to prevent their members from accepting these commissions. A pharmaceutical chemist stated that:— Secret commissions are given by chemists to medical men on their prescriptions supplied to patients, in some cases amounting to from 25 to 50 per cent on the price charged by the dispensing chemist. It was also proved that doctors handed to the sorrowing widow an undertaker's card, and received a percentage of 10 to 20 per cent. on the funeral charges, though I should be sorry if your Lordships were to suppose that I believe this practice is general among medical men. There is no profession which renders more noble and freely gratuitous public service than the medical profession, and it is in the interests of that profession that the black sheep among them should be driven from the flock. A case came before the courts a little time ago, in which a company had been formed for the sale, in part, of some kind of medicated wine, said to be useful for particular diseases, and in which it was shown that founders' shares were distributed 16 amongst doctors upon the terms that the doctors were to puff the wares of the company. The Report then goes on to deal with cases of electrical and mechanical engineering, and one witness says:— I have come in contact with several cases most prejudicial to the healthy development of trade generally, chiefly among the London engineers, who specify for particular makes of articles, and that everything shall be to their approval, in order to be able to press the contractors for money. Then there are consulting engineers of the highest standing and above all suspicion, but in whose offices there are men who, unknown to their employers, receive indirectly or directly commissions, and who levy blackmail on the contractors. Another case is that of a steward on a large estate who gives particulars of discounts and commissions having been received. In another case, in which a gunsmith supplied the owner of an estate with guns and ammunition, it came to the knowledge of the master that his gamekeepesr had been in the habit of receiving considerable bribes in the shape of commission. He wrote to the gunmaker and expostulated with him. The gunmaker replied that on the terms the owner of the estate suggested he must decline to supply him. The explanation he gave was, that if the servants were not bribed the guns would be represented as unsatisfactory, and objection would also be taken to the ammunition. Then the Report goes on to give illustrations relating to the cutlery trade. In this trade, it is stated that:— The mischievous practice has done a great deal of harm to the proprietors of houses in London especially. The mode of levying blackmail goes right through in some houses, even to the boy who takes in the manufacturer's card to the buyer, their civility and attention having to be paid for by the unfortunate traveller. The mischief is very far spread. One witness said he had lost scores of orders through refusing to bribe, and added that the system of bribery that they had to contend against in London existed to an alarming extent, and if it were not stopped it would be impossible for honest men to do business. The system also prevails in regard to tin-plate workers and japanners. A Birmingham merchant wrote, calling attention to the same practice and a large wholesale warehouseman said:— The abuse you are endeavouring to modify, if not eradicate, is a hydra-headed monster, whose operations are conducted underground and difficult to unearth. 17 Then I come to a case on which I would ask your Lordships' permission to dwell for one moment. It relates to the trade of dyeing in Yorkshire. One agent writes:— It would not be too much to say that there are firms of very prosperous drysalters whose every account depends on bribery. It so permeates the trade that we cannot stop it. Dyes, which are worse than useless, are palmed upon the manufacturer to make up a respectable bribe to the men. A woollen cloth manufacturer and dyer said:— I saw at once that unless I bribed the dyers I could do little or nothing. Dyers simply take the one they are paid secretly the most to use. Dyers, I hear, have 3d. per bag (1 cwt.) off logwood. Anyone who omits this cannot sell logwood. I know two honest men driven out of the trade. The Germans are the worst bribers. I had several vats I was trying for manufacturers deliberately spoilt because I would not bribe the men. One of the most painful experiences which I have had professionally was at the. Leeds Assizes, where I had to defend an old man, who had been in business for something like 50 years. He was a member of the local corporation. His son was succeeding him in business. He was charged at the Assize Court with having entered into a conspiracy with Lord Masham's foreman dyer to defraud Lord Masham, who is the head of a silk manufactory in Bradford, by invoicing goods which were never delivered, by invoicing inferior goods and charging the price of higher-class goods, and, occasionally, when they sent the best goods, by charging an excessive price for them. When I saw my client and his solicitor, I said: "If the evidence as on the depositions comes out, the case is hopeless. How could a man holding a respectable position, and so long before the public, be a party to such transactions?" His explanation was a very pathetic one. He said he could not help it; that he was driven to it. It began first with small commissions, but gradually the screw-was turned on, and his trade profit would have disappeared altogether if he had not fallen in with the arrangement. I asked him if he could not have gone to Lord Masham, and told him. He said he could, but the result would have been that the foreman would have been dismissed and another man put in his place, and, if he had not made an 18 arrangement with the new foreman, that man, when a vat containing perhaps £220 or £300 worth of stuff was in the process of dyeing, would have put some noxious stuff into the vat, and would have said to Lord Masham, "See the kind of drugs you are using. You will have to change your drug merchant." I do not believe that is at all an isolated case. A number of witnesses drew attention to the prevalence of bribery in the case of buyers for large houses and co-operative companies; also in the calico trade, the publishing trade, and the printing trade. I am sorry to say that the latter is one of the worst cases of all. I have had a letter from the representative of a large firm of dealers in ink, colour, and varnishes. He says:— A certain newspaper in the provinces allowed their machine overseer to order inks, with the result that we had to pay this man 5s. per drum, so as to get the orders. When the price of inks fell, so as to make the 5s. per drum too heavy a, proportion to allow us a profit, the man suggested that we should send smaller drums, as they were not weighed. A machine overseer called last week and said he was going to a new situation, and we must give him £2, as he had lost every penny (we think when drunk), otherwise he would not recommend our inks at his new place. A manager of a large lithographic printers borrowed £20 from our traveller, and gave out orders for printing ink upon which he had 10 per cent. commission till the loan was cleared off. A foreman who used our inks, on which he levied 1d. per pound, which he called "Chapel Money," regretted that he could not now use so much as formerly, as his employer had put in a gas engine in place of a boiler driven by steam, so there was no furnace in which he could get rid of any ink. The expression "Chapel money" perhaps needs a word of explanation. The phrase in the printing trade comes down, I believe, from the time of Caxton, who first printed in a crypt of Westminster Abbey. To this day, on the composing staff in a printing office, there is a member who is known as the "Father of the Chapel." The writer of the letter, from which I have just quoted, says that the acceptance of ink or machinery depends, except in cases where men look after their own business, not upon the excellence of the things, nor their price, but upon the amount of the bribes that are given. I have here original demands from over- 19 seers for Christmas-boxes, which are to be sent to them privately, and in some of these cases sums amounting to £25 have been paid. The Report also states that the practice prevails in the brewing trade, bribes being given to butlers, also to coachmen, gamekeepers, and even gardeners. With regard to the coal trade, there are in your Lordships' House noble Lords who are coal proprietors, and who, I hope, will give us the benefit of their experience, so that we may know what should be done in that trade to prevent this kind of thing. I had a remarkable experience in a case which at the time attracted a great deal of attention, and which had its grave and tragic, as well as its ludicrous side. I mean the case of the gas corporation in Salford, where the gas manager, having been charged by one Mr. Ellis Lever with such an offence—namely, insisting on bribes—prosecuted Lever criminally for a libel. It was proved at the time that he had taken bribes. It turned out, however, that Ellis Lever was in the best possible position to know that the man had taken bribes, as he had for years given them himself. I will read another passage from the Report of the Special Committee:— At the first meeting of the Committee on the 2nd of February, a member, who is a wholesale merchant, stated that commissions were not so often asked for as expected, and that if the commission or bribe was not forthcoming, the account either diminished or was closed. The difficulty was to prove anything. In the export trade there was the pernicious practice of allowing a so-called trade discount. Frequently two invoices were asked for, and some traders even requested to be supplied with extra blank invoice forms. My Lords, I will make allusion also to the case of supplies to large institutions, whether they are hospitals, charitable institutions, asylums, or workhouses, in regard to which there is grave abuse, and a system of pernicious and corrupt bribery prevails. The case of the Grosvenor Hotel is in your Lordships' recollection, and my attention has been called to cases of other hotels quite as bad, and in some respects worse than the case of the Grosvenor Hotel, because in that case the principal person who was said to have benefited by these evil practices was a man largely interested in the hotel. Lastly, there is the case of buyers from wholesale houses. Again and again it has been proved before the 20 court that this system prevails. Quite recently, in a case tried before me— Oetzmann's case—it was proved that the wholesale buyer was regularly paid by the wholesale manufacturer, and in this way, and in this way only, were orders secured. There was one thing which has struck me very much in this matter—the host of letters that have been sent to me and to others in this connection, including Sir Edward Fry, through which there runs a very piteous note. Men, confessing themselves to have been parties to this very practice, beg and desire help in the endeavour to be emancipated from it. They hate the practice, and want to get rid of it, but feel tied hand and foot. My Lords, I should be disappointed if I have not said enough to show your Lordships that this is a serious matter, which requires to be dealt with, and dealt with by legislation. I would remind your Lordships that what you are asked to do in the present case is to extend to transactions of the kind that I have been describing the principle which is already on the statute book in the case of public bodies. The Act of 1889, passed at the instance of Lord Randolph Churchill, makes bribes to employees or officials of public bodies a criminal offence, to be dealt with by severe punishment. I desire your Lordships to remove the limitation which restricts that law merely to the case of public bodies. We are dealing with the case of transactions where the commission is illicit, illegal, and could have been recovered by action from the man who received it, and in respect of which a civil action could also have been brought against the man who paid it. Those are the cases in which I seek to make the giving and receiving of commissions a criminal act. I beg your Lordships to bear in mind that anyone who might come under the operation of this Bill, if it becomes an Act, can relieve himself of all dread of punishment under it if only he is open and above board. For instance, if a servant says to his master, "I am getting a commission from the coachbuilder," or from this or that tradesman, and the master consents to it, it is well and good, and so in the case of any other commission. The vice of this thing is its secrecy. I cannot better explain the objects of Bill than I have done in the opening sentence of the Explanatory 21 Memorandum which accompanies the Bill, and which says:— The object of the Bill may be shortly stated as an effort to check, by making them criminal, a large number of inequitable and illegal secret payments, all of which are dishonest, and tend to shake confidence between man and man, and to discourage honest trade and enterprise. How do I propose to carry out that object by this Bill? In the first place, clauses 3 and 8 declare certain specific transactions are corrupt unless the contrary is shown. I can, I think, explain what I mean by that if I read one clause, the third:— Every valuable consideration given or offered to an agent, by any person having business relations with the principal of such agent, shall be deemed to have been corruptly given or offered, unless it be proved— (a) That the principal had given his consent thereto; or (b) That the valuable consideration was not calculated or intended, and had no tendency to corrupt the agent, by inducing him to do or to leave undone something contrary to his duty, or by creating any other undue influence on the mind of the agent. What goes to the pith of this matter is that the receipt of these commissions creates a conflict between interest and duty; that is the moral basis for the legislation which I am asking your Lordships to adopt. The clause to which I have referred meets the great majority of those cases. There is, of course, the other class of cases to which I have referred generally, and as to which, no doubt, a greater amount of controversy may be expected—I mean the cases where the advice is given by A to B to deal with C, and C pays A without the knowledge of B, to whom the advice was given. Such cases are those of doctors, undertakers, solicitors, and brokers already mentioned. In some of these cases the practice may be so wellknown that all parties may be taken to have known of and consented to the arrangement, and such a case would be entirely outside the statute. But the best class of professional men, whether in law or medicine, I believe, do not do such things as this Bill is designed to prevent. Another clause is aimed at the giving of false receipts, which is a favourite method for the payment of commissions. The receipt is given for the full amount, and appa- 22 rently no deduction at all is credited to the principal, the fact being that it is retained as a bribe by the agent. Then come the penal clauses, which are matters entirely to be dealt with by Parliament having regard to their views of the serious character of the offence. There is one provision which I ought to mention to your Lordships, which has been pointed out as essential by Sir Edward Fry, and by others interested in this question. There is enormous difficulty in getting evidence on these questions, and, therefore, somewhat in analogy to the provisions to be found in the Acts relating to bribery and corruption, there is a provision which would require a witness to give answers to questions, even though the answers might tend to incriminate him, but if he truly answers, then the judge who hears the case shall give him what is practically a certificate of indemnity. Another point is, ought this to be an Act which any person could put in force, or ought there to be in it a provision, as in the Act of 1889, requiring the fiat preliminary of the Attorney-General? My own impression is that the power should be given to the Attorney-General to exercise his power to enter a nolle prosequi if he thinks the case vexatious, or the like power could be given to a judge, if he takes the same view, in order to stay proceedings. That is all I have to say on the subject, of the Bill itself, but there is the further question of public opinion. We recognise that we cannot go much in advance of public opinion, because, if we do, the Act would become to a large extent a dead letter. It is, on the other hand, a curious fact that, while public opinion acts upon legislation, legislation acts upon public opinion; and, again and again it has been found that a man who does a thing before an Act of Parliament condemns it, shrinks from doing it after such an Act is passed. That such is the case is proved by the experience of the operation of the Act of 1889, to which I have referred. There have been few prosecutions under that Act, though there have been some in cases of corruption by employees or agents or representatives of public bodies; but the Act, nevertheless, had wrought a very material and very important change for the good (though there is still great room for improve- 23 ment), and in the same way I believe that one important effect of this Bill, if it passes into law, will be that many men will be glad to have this Act as an answer and a means of defence to which they can resort in resisting the attempts of blackmailers to insist upon payments or bribes for orders. My Lords, I am further in a position to inform your Lordships that those best entitled to speak upon this matter have spoken strongly in support of the Bill which I am asking your Lordships to read a first time. I have taken the course of circulating copies of the Bill, as I now present it to your Lordships, to every considerable Chamber of Commerce in Great Britain and Ireland, and in only three cases in their replies have Chambers of Commerce, so to speak, belittled the Bill, saying that the matter was of no great importance, and that, after all, this bribery is of a very trifling character. These exceptional cases are the Chambers of Commerce of Swansea, Cardiff, and Belfast, and in the last-mentioned instance the resolution of the Chamber was published in a local newspaper. Oddly enough, among the mass of letters I have received on the subject came one from a private correspondent in Belfast, telling me not to mind what the Chamber of Commerce said, and assuring me that the Bill was very much needed in Belfast, as it was in many other places. As to the other two places mentioned, my information is that these evil practices are rife in the coal, iron, and shipping trades. I will conclude by telling your Lordships that in the strongest language the Associated Chambers of Commerce have expressed gratification at the attention of Parliament being drawn to this growing reprehensible practice, which is greatly injurious to business, and cannot be too strongly deprecated in the interest of commercial integrity. Amongst the Chambers of Commerce from which I have received communications in this sense are those of London, Liverpool, Manchester, Leeds, Birmingham, Bristol, Newcastle, Sheffield, Batley, Wolverhampton, Luton, Edinburgh, Glasgow, and Dublin, and I have received similar communications from the Liverpool Provision Trade Association, and the West Yorkshire Federated Chamber of Trade. The Labour Association for promoting co-operative production, based on the co-partnership of the 24 workers, representing one and one-half million co-operators, with a capital of £20,000,000, and an annual trade of £60,000,000, has replied, giving the terms of a resolution which will be submitted to the Congress to be held at Liverpool at Whitsuntide, and which is as follows:— That this Congress expresses its strong approval of the principle of the Bill promoted by the Lord Chief Justice with the object of bringing the practice of giving and taking secret and illicit commissions in trade and commerce under the criminal law, believing that such practices are seriously demoralising to individual character, injurious to industrial and commercial enterprise of every kind, and especially destructive and harmful to all forms of co-operation, and to municipal and public bodies generally. I feel strongly on this question, and have been led to detain the House at some length, with the hope that your Lordships will share the strong interest I feel. As a question of money, and as affecting trade, it is important, but that is not the only view presented to my mind. It is a practice that tarnishes the character of lawful commerce; it blunts the sense of honesty in the men engaged in it; it is injurious to the honest man, trying to conduct his business on high and honourable principles, and has a corrupting and degrading influence in ways that I need not formulate or define. I commend the Bill to your Lordships as an honest and a not hastily considered attempt to deal with what I conceive to be, and what, in the opinion of the Committee of the London Chamber of Commerce, is, a great and growing evil.