Corporate Livewire’s Fraud & White Collar Crime Roundtable 2015 provides in depth analysis on the latest trends and recent developments. Corporate Livewire spoke with nine experts from around the world with highlighted topics including: the belief that ‘surprise audits’ could remove the temptation of fraud, the trend towards ‘prosecution by sound-bite’ and a discussion on the increased importance of whistleblowing.
Can You Outline The Role Of The Enforcement Authorities That Prosecute Fraud And White Collar Crime In Your Jurisdiction?
PB: In England and Wales, the Serious Fraud Office is the lead enforcement body for the investigation and prosecution of serious or complex fraud and corruption. The Director of the SFO will take on cases which meet his acceptance criteria, which include cases where the actual or potential loss is high (in practice in excess of £1 million), where there is a need for specialist skills and the statutory investigation powers of the SFO as well as its combined investigation and prosecution function. It also includes cases which involve a “new species of fraud” or cases where there is a high degree of public interest such as in the current LIBOR prosecutions and the foreign exchange investigation.
Other bodies involved in the prosecution of fraud include the Crown Prosecution Service which also prosecutes tax fraud and the Financial Conduct Authority which prosecutes civil market abuse cases as well as criminal insider dealing.
Have There Been Any Recent Regulatory Changes Or Interesting Developments?
PB: The most eagerly awaited new development which has occurred recently was the advent in England and Wales of Deferred Prosecution Agreements. DPA’s came into English law as a result of a sustained campaign in recent years for the Serious Fraud Office and some other prosecutors to have powers similar to the US Department of Justice to enter into settlement agreements with companies as an alternative to lengthy and expensive criminal trials. The English DPA model, which became law in February 2014, provides for much stricter judicial controls than its US counterpart. Significantly, almost a year later we are still yet to see the first DPA, although one is expected soon probably in a relatively small case. DPA’s apply only to companies, and individuals cannot therefore benefit directly from one.
Have There Been Any Noteworthy Case Studies Or Examples Of New Case Law Precedent?
PB: In the case of R v Evans, the Serious Fraud Office came badly unstuck when it attempted to mount a prosecution in a fairly complex (but not exceptionally so) commercial case which involved the transfer of ownership of certain coal mines to offshore companies in a scheme which resulted in the owners of the mines avoiding significant statutory environmental restoration liabilities. The SFO advanced their case in a rather incoherent manner which changed over time and their case was dismissed by an experienced High Court judge. The SFO next attempted to re-start the prosecution by means of the voluntary bill procedure before another High Court judge, but failed badly to so. The second judge agreed with the first judge that the SFO had not approached the case with “particular analytical precision”. The SFO had failed to set out their case fairly and in a way that the defendants could know the case they were expected to meet. The SFO now faces a very large costs claim.
Can You Outline The Key Fraud And White Collar Crime Trends In Your Jurisdiction?
PB: In the last few years, there has been a sharp focus on corporate offending, particularly after the Bribery Act came into force in 2011. Nevertheless, there is a heightened risk for individuals; especially senior managers and directors due to the continuing, and sometimes highly questionable, political and public pressure for individuals to face prosecution for financial wrongdoing, even where the evidence to support such allegations may be lacking. On both sides of the Atlantic there has been an unwelcome habit developing of “prosecution by sound-bite” where lead prosecutors issue public statements, often on television, referring to limited extracts from emails and text messages said to constitute evidence of individual as well as corporate guilt.
Can You Explain How Whistleblowing Works In Your Jurisdiction With Reference To Incentives And Protection?
PB: Whistleblowing in England can be fraught with difficulty, may often mean a long term commitment to co-operation, and in some cases can result in a whistleblower facing prosecution. Legal advice should always be taken before making a disclosure and the alternatives should be properly evaluated. For example, there may be a reliable internal confidential reporting line at the work place or there may be a route to a confidential report to a non-executive director. Reporting to the authorities is not the only option and should not necessarily be the first option. There are statutory protections under the Public Interest Disclosure Act 1998 for employees who inform on their employers and it is possible to report suspicions in confidence to the SFO and other bodies, including the police. However, where the whistleblower has been involved in the alleged criminal conduct personally, care will be needed to ensure that the whistleblower does not become a target of a criminal investigation or be faced with the unwelcome prospect of being offered a co-operation agreement in exchange for a guilty plea and a chance of a lenient sentence. The stakes can be very high, including the risk of prison.
How Should A Company Manage An Internal Investigation Into Fraud & White Collar Crime?
PB: Companies in England now need to pay careful regard to the expectations of regulators and prosecutors in relation to the conduct of internal investigations. Sometimes these expectations are unreasonable or unrealistic but any internal investigation needs to be structured so that the conduct of the company and its management in relation to the potential wrongdoing can be fully justified. First, any response needs to be proportionate to the facts revealed; it must address the company’s obligations to its shareholders, staff and customers; to its regulators and to the wider public but there should be no over-reaction. Second, any investigation should be demonstrably independent of the individuals involved and usually this will be best achieved with independent lawyers working with appropriate investigation, IT and accounting expertise as required. Third, there should be no rush to judgment or conclusion and the temptation to provide an uncontrolled running commentary on speculative allegations to regulators or the media should be resisted. Lastly, careful advice should be taken on all the available options, including fighting any criminal charge in court.
What Advice Would You Give To A Company Dealing With Media And Other Reputational Issues Arising From Investigations?
PB: Engage the best media consultants you can who are familiar with working with the lawyers engaged to advise the company. Develop a clear strategy that addresses the legal and reputational issues involved and avoid creating more of a story than there is.
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