DEFERRED PROSECUTION AGREEMENTS – NEW LANDSCAPE IN THE FIGHT AGAINST TOP LEVEL FRAUD

Written 17th August 2012 by Olliers Solicitors

2013 is likely to see a new landscape in the fight against top level fraud. The Ministry of Justice “consultation on a new enforcement tool to deal with economic crime committed by commercial organisations: deferred prosecution agreements” ran for three months and closed on the 9th August 2012 with a response expected soon.

 

2013 is likely to see a new landscape in the fight against top level fraud. The Ministry of Justice “consultation on a new enforcement tool to deal with economic crime committed by commercial organisations: deferred prosecution agreements” ran for three months and closed on the 9th August 2012 with a response expected soon (https://consult.justice.gov.uk/digital-communications/deferred-prosecution-agreements).

 

Under a deferred prosecution agreement (DPA) a company that has been involved in illegal activity may avoid prosecution in appropriate circumstances so long as it agrees to and subsequently complies with certain conditions.

 

Firstly there will be a hefty financial penalty. The prosecutor will then agree not to prosecute the organisation provided additional requirements are complied with. These are likely to include, restitution for victims, confiscation of profits, imposition of measures to prevent further offending. There is also likely to be monitoring to assess compliance with new policies and or procedures introduced.

 

There are a variety of reasons behind the move towards DPA’s. The Ministry of Justice feels that there are currently limited options for dealing with corporate criminal liability. Identifying criminal activity can be difficult (and by implication expensive) and offending may be cross jurisdictional. Consequently the number of “outcomes” is relatively low.

 

It is also recognised that when prosecutions do take place there can be unintended consequences such as the impact on share price, prejudice to innocent shareholders, employees, customers, pensioners, suppliers and so on.

 

Moreover, under current arrangements there is little or no incentive for an organisation to self report offending, in circumstances where this is likely to lead to a prosecution.

 

In contrast under the proposed DPA’s, self reporting is central to the process.

 

In his speech to the Annual Forum of Anti Corruption of the 26th June 2012, David Green, recently appointed Director of the Serious Fraud Office (SFO) indicated that he was fully supportive of DPA’s in appropriate circumstances (http://www.sfo.gov.uk/about-us/our-views/director’s-speeches/speeches-2012/6th-annual-european-forum-on-anti-corruption-on-26-june-2012.aspx).

 

He indicated that whilst “a corporate that self reports cannot be given a guarantee in advance that they will not face prosecution…… the fact of self reporting liability is plainly a factor to be recognised in the assessment of the public interest element of the Code test applied in deciding whether or not to prosecute”.

 

David Green also referred to his reorganisation of the SFO into four casework divisions – two dealing with fraud and two dealing with bribery. Whether this means that 50% of the SFO’s resources will be targeted at bribery is not clear but it clearly gives an indication of their priorities.

Interestingly in his speech of the 26th June and his earlier address to the PWC Annual Corporate Accountability Conference of the 14th June 2012 (http://www.sfo.gov.uk/about-us/our-views/director’s-speeches/speeches-2012/10th-annual-corporate-accountability-conference-held-at-pricewaterhousecoopers-on-14-june-2012.aspx), David Green also alluded to other tools at the SFO’s disposal namely Immunity Agreements under the Serious Organised Crime and Police Act 2005 and plea discussions subject to the Attorney General’s guidelines.

For more information on these additional tools the following links may be helpful:

 

However our view is that these options are less likely to apply to self reporting situations.

Writing in The Law Society Gazette in June of this year Richard Shave of BDO’s Forensic Division quoted some interesting figures in relation to DPA’s in the States. The US Department of Justice netted a staggering $2.3b from 32 deferred prosecution agreements in 2010. These figures alone present a powerful case for the introduction of DPA’s. Even one tenth of the US figure would cover the SFO’s annual budget many times over.

So there is no doubt that DPA’s stack up financially. Investigators can avoid lengthy and expensive prosecutions, focussing their energies on a greater number of investigations and achieving higher levels of outcome combined with revenues from financial penalties imposed. Offending organisations, particularly those that self report can clean up their acts and move on without the catastrophic effects of lengthy criminal prosecution and conviction.

There certainly seems little doubt that in years to come DPA’s will feature heavily in the fight against top level fraud, bribery and corruption.

 

See below for additional articles on the provisions of the Bribery Act:

  1. http://www.olliers.com/articles/9-bribery-act-2010-adequate-anti-bribery-procedures-must-be-in-place-by-july-2011.html
  2. http://www.olliers.com/articles/10-the-bribery-act-2010-is-your-business-at-risk.html
  3. http://www.olliers.com/articles/20-bribery-act-2010.html

Written by Matthew Claughton

Olliers Solicitors
Castlefield Chambers,
Manchester,
M3 4NF.
0161 834 1515
www.olliers.com
matthewclaughton@olliers.com

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