|February 27, 2014|
Previously published on February 24, 2014
After a long wait and public consultation process, Deferred Prosecution Agreements (“DPAs”) became available to prosecutors in England & Wales from 24 February 2014.
Under a DPA, a company that has engaged in unlawful conduct can avoid prosecution in exchange for certain promises to the prosecution, for example, the payment of a financial penalty, implementation of a compliance programme, compensation for victims and costs. DPAs can lead to a situation of mutual benefit where the company avoids a public trial and potential conviction, and the prosecutor avoids the expense of a prosecution. However, if the company fails to comply with the terms of a DPA then this would allow the prosecutor to reopen the prosecution
In the Serious Fraud Office’s press release, its Director, David Green QC, was keen to stress that DPAs are not a “panacea” or a “mechanism for the corporate offender to buy itself out of trouble”. Alison Saunders, the Director of Public Prosecutions, indicated that the “circumstances appropriate to the use of DPAs may be quite rare for the CPS”. The big question remains therefore as to when a DPA will be appropriate; only application will truly tell. The joint Prosecutors’ Code of Conduct outlines the indicators which point to whether a prosecutor may enter into a DPA - a key factor will be that the corporate has shown a “genuinely proactive approach” to dealing with the offending, including self-reporting. This is a point emphasised by Green QC in his press release accompanying the launch of DPAs with the words “unequivocal cooperation from the corporate” as an important feature of DPAs. We considered the public interest factor weighing for and against the use of DPAs in July 2013 which remain applicable within the final Code.
There has been considerable debate as to whether the introduction of DPAs will encourage more companies to self-report wrongdoing, with particular focus on Bribery Act offences. The answer is unclear. The likely reality is that some companies will wait to see how the use of DPAs plays out in the future. However, David Green QC last year outlined five reasons why companies that have uncovered wrongdoing should self-report which includes the fact DPAs might then come into the frame:
(i) A self-report mitigates the chances of a corporate being prosecuted. It opens up the possibility of civil recovery or a DPA.
(ii) There is the moral and reputational imperative; it is the right thing to do and it demonstrates that the corporate is serious about behaving ethically.
(iii) If the corporate chooses to hide the misconduct rather than self-report, the risk of discovery is unquantifiable. Green QC highlighted the many potential channels leading to exposure: whistle-blowers; disgruntled counterparties; cheated competing companies; other Criminal Justice agencies in the UK; overseas agencies in communication with SFO; and the SFO's own developing intelligence capability.
(iv) If criminality is buried and then discovered by any of the above routes, the penalty paid by the corporate in terms of shareholder outrage, counterparty and competitor distrust, reputational damage, regulatory action and possible prosecution, is considerably magnified.
(v) Last but not least, hiding such information is likely to involve criminal offences related to money laundering under sections 327-9 of the Proceeds of Crime Act.
The last reason is a very powerful one which is likely to move most Executive Boards towards self-reporting where they have uncovered the company has benefited from wrongdoing. Time and practice will tell whether that theory is correct, and when DPAs will be deemed to be in the public interest.