Deferred Prosecution Agreements


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The director of the Serious Fraud O"ce (SFO) and the Solicitor General, Edward Garnier QC, have recently made no secret of the fact that they consider the criminal justice system to be incapable of dealing with corporate prosecutions in a way that refflects commercial realities. The blunt impact of a prosecution of a company has the impact of damaging innocent parties including employees, shareholders and creditors. Garnier cited the cautionary example of the ill-effects of prosecution caused to Arthur Andersen, eventually acquitted on charges of obstruction of justice by the US Supreme Court, many years after the allegations had destroyed the company. US prosecutors have a tool at their disposal, the deferred prosecution agreement (DPA), which is being touted as a viable alternative to the present options of either prosecution or civil recovery.

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Deferred Prosecution Agreements

  1. 1. BARK & CO SOLICITORSDeferred ProsecutionAgreements
  2. 2. The SFO effectively had alreadyagreed with the company, pre-sentencing, the nature of the sentencein return for a guilty plea. This wascriticized by Thomas LJ who remindedthe SFO that it is for the Judge todetermine sentence at his discretionand especially that any plea must be“rigorously scrutinized in open court”.
  3. 3. The US ApproachIn the US, DPAs are considered a hugelyimportant weapon in the armoury of a highlysuccessful prosecutor – the Department ofJustice, which entered into nine DPAs in2009. The DPA does pretty much what itsays on the tin, deferring criminalprosecution pending certain terms andconditions being agreed (and adhered to)and filed in a formal indictment at court.
  4. 4. Typical conditions are that prosecution is deferredfor two - three years with the payment of a 0necommensurate with the Federal SentencingGuidelines, disgorgement of pro0ts, a clear out ofimplicated directors, a possible pull-out from themarket in which the wrongdoing is admitted, andthe possible instruction of a court appointedmonitor where the corporate does not have properanti-corruption procedures presently in place.
  5. 5. The appointment of monitors has beenparticularly contentious in the US where therehave been allegations of a lack of transparencyin their appointment, cronyism and high cost.The costs charged by monitors is particularlyeye-watering to UK onlookers. Innospec werecharged $50m for the corporate monitor(described by the sentencing Judge as “anoutrage”), agreed as part of their DPA in the US.
  6. 6. Are DPAs Right for the UK?As it stands in the UK, the SFO has found itdifficult, time consuming and costly toprosecute corporates in the UK for bribery andrelated offences as well as occasionallystymied by political interference. It is unlikelyto 0nd it any easier under the Bribery Act. Itshould also be noted that the SFO has beengiven no new money to prosecute offencescommitted under the Bribery Act.
  7. 7. What Will DPAs Look Like?The mechanics of DPAs are a long way from being ironedout. The DPAs must have the public’s con0dence and, in thewords of Garnier be “policed and controlled by the judiciary”.In the event that an offence is either detected, perhapsthrough a whistleblower, or self-reported and the SFOconsiders a may be an appropriate resolution, the Judge willbecome involved early, and before charges are brought toscrutinize any propsed agreement. This will be problematic.
  8. 8. Finally, it will be important that it is madeexplicit that while DPAs may prove analternative to prosecution forcorporates, where individual criminalityis committed (as is necessary for thecorporate to meet the identificationprinciple), DPAs will not provideimmunity to those directors deserving ofProsecution.
  9. 9. In the absence of settled Court of Appealcase law on corporate sentencing, properlydebated and approved sentencing guidelines(related to the guidelines already issued bythe sentencing council for theft and statutoryfraud offences) setting out procedure andfactors affecting sentence would be helpful inanswering criticism of a lack of transparencyas well as assisting parties to the DPA.
  10. 10. We consider that as with most USdevelopments in business crime, DPAsare likely to prove popular over herewith the SFO. The principal questionexercising legislators will be how toensure that DPAs have the public’sconfidence that they are fair and justwhile ensuring that Judges’ concernswill be met and the sacrosantprinciples underpining sentencing willnot be underminded.
  11. 11. “The US has a system bywhich sentence can more or less be worked out on a calculator – that is an anathema to Judges here.”