The use of Deferred Prosecution Agreements is likely to become available to the SFO and the CPS in early 2014. A Deferred Prosecution Agreement (DPA) will be an agreement between the prosecutor and a company (they do not extend to individuals) that a criminal prosecution for an economic offence (for example bribery, corruption, fraud, money laundering) will be deferred or postponed if certain conditions are met (the payment of substantial penalties, compensation to victims, disgorging of the profit from the wrongdoing, reforming culture and practice to prevent future reoffending). If those conditions are met, the prosecution will be dismissed.
The government hopes that DPAs will be an incentive for organisations to engage and cooperate with the SFO/CPS at an early stage to achieve a better outcome. In the process they will avoid an expensive and lengthy investigation and subsequent proceedings which are uncertain, time consuming and reputationally damaging. For the prosecutor, it is hoped that DPAs will: free up resources; encourage self reporting and hence the detection of more corporate crime leading to more corporate accountability; and generate revenue from penalties (although it is said that this in itself would not be an excuse to use a DPA over a prosecution).
The decision to enter into DPA discussions will be governed by a Code of Practice (which has yet to be drafted). A preliminary hearing will then take place before a Crown Court judge in private who will decide if the DPA is “in the interests of justice” and if its proposed terms are “fair, reasonable and proportionate”. The DPA will include an agreed statement of facts, the terms and conditions and an expiry date upon which the Agreement will cease to have effect. The Sentencing Council will produce sentencing guidelines for offences that are likely to be covered by a DPA in order to calculate the discount of up to one third of the financial penalty. The final DPA will require the approval of a Crown Court judge in open court and the terms of the DPA will be published. Upon the expiry date, the prosecutor will publish details of how the DPA has been complied with. If there is a breach, this will be publicised and contested or significant breaches will need to be dealt with by a judge who will apply the civil standard of proof in determining the breach. The court may terminate the DPA on its own motion. There will be no right to appeal any judicial ruling in this process.
The proposals have caused concern that there is little if any incentive for an organisation to self report. For example, there is no certainty that the DPA will be approved by the judge; admissions made during the DPA negotiations can be used against the company in any subsequent criminal proceedings (the concession is that the admissions cannot be used against individuals, although any other information provided can be); the DPA will be made public and so reputational damage is likely to be significant; the DPA can be used against a company or individual in civil proceedings; the maximum reduction in the financial penalty is set at one third which is the same as an early guilty plea in the Crown Court; and the fact of a DPA may result in an organisation being excluded from tendering for public contracts. These concerns, along with the perception that the SFO lacks teeth when it comes to detecting, investigating and ultimately prosecuting corporate crime, may mean that organisations won’t be in any rush to go down the DPA route.
Corker Binning is a law firm specialising in fraud, regulatory and general criminal work of all types. Read David Corker’s recent article on DPAs and call us on 0207 353 6000 to find out more about our business crime practice.
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