Special focus: Deferred prosecution agreements could be blunted before they bite
No sooner had Britain’s fraud fighting unit been given a shiny new weapon, deferred prosecution agreements (DPAs), than the Conservative Party announces that it will shut the unit down if it wins the general election.
Launching the Tory general election manifesto, Theresa May said her government would close the Serious Fraud Office (SFO) and pass its responsibilities to its upstart sibling, the National Crime Agency. That includes the handling of DPAs, and there fears that that may blunt what has swiftly become a useful tool.
The surest sign that the judiciary is keen to encourage DPAs, says David Corker, a partner at the London law firm Corker Binning, is the discount to the financial penalty on offer. Schedule 17 to the Crime and Courts Act mandates that the financial penalty must be “broadly comparable to the fine that a court would have imposed” following conviction after a guilty plea. The standard reduction is one third. Standard Bank got roughly that, receiving a 30 per cent reduction. But for XYZ Sir Brian was prepared to countenance a 50 per cent reduction, despite the “systematic bribery over a period of eight years”.
He took this flexible approach in recognition of the company’s means and the impact insolvency would have had on its innocent staff. Rolls-Royce was also given a 50 per cent reduction, although it will still have to pay almost £500 million, and another key reason was to encourage the companies to co-operate and put their houses in order. As Corker notes, in theory you get a greater discount if you seek and advance a DPA than if you plead guilty on the first occasion at the crown court.
But is fessing up always the right option? In some instances, Corker says, opting for a DPA will be a “no-brainer”. For example, if a company is involved in public procurement, where a conviction for corruption can result in mandatory and permanent debarment.
But, while an extra 17 per cent discount is on offer, there are “big disadvantages” to the DPA route: adverse publicity, possible consequent litigation, and assistance required in the prosecution of ex-senior managers. Entering negotiations, adds Corker, is “fraught with risk and uncertainty” as a company cannot guarantee that a DPA will be agreed at the end of the process. “You may be opening a Pandora’s box when you might have been able to limit the damage by pleading guilty and not co-operating,” he says. “If you think the SFO may never uncover the full extent of corruption, you are far better off pleading guilty.”
Despite the high fine for Rolls-Royce, practitioners expect more corporates will offer themselves up. Corker says: “[David Green, director of the SFO] has succeeded in his aim of establishing DPAs as something that companies should contemplate and the courts have backed them. They are set to remain.”
Corker suspects DPAs herald a “softening up of the ground for an extension of corporate criminal liability in economic crime”, suggested by the Ministry of Justice in January. He predicts that in the next five to ten years, the section 7 Bribery Act model will be extrapolated to cover other failure to prevent offences.
Read the full article in The Times Law Brief here, behind a paywall.