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The UK Serious Fraud Office (SFO) has publically announced that it has sent out the first invitation letters offering DPAs to corporations.
Today we discuss:
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the definition of a DPA;
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the new attitude in relation to DPAs and movement towards the first DPA; and
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co-operation with the SFO– dos and don’ts.
Quick Recap: What is a DPA?
The Bribery Act is not the only development in fraud related legislation in the last 5 years; Deferred Prosecution Agreements have also been introduced in the UK following the Crime and Courts Act 2013.
A DPA is essentially a plea bargain that allows for the suspension of a prosecution for a fixed period of time, but only if the organisation agrees to stringent conditions. DPA conditions could include account of profits; payment of a fine; compensation for victims and costs; co-operation in prosecution of individuals; and involvement with a compliance programme. DPAs might be appropriate if public interest is not necessarily well-served by a prosecution.
As far as corporations are concerned, DPAs are strictly for use in relation to economic crime cases, in particular fraud, bribery and money laundering offences. The SFO defined a DPA as: “an agreement reached under judicial supervision between the prosecutor and an organisation.”
The SFO have also produced guidance in the form of the Deferred Prosecution Agreements Code of Practice.
New attitudes and the Start of Negotiations
Ben Morgan, Joint Head of Bribery and Corruption at the SFO, discussed DPAs in May this year in his speech on Compliance and cooperation at the 2015 Mining Conference. He upheld the hard-lined image of the SFO (discussed in our previous blog – The Serious Fraud Office gets serious) and reminded us that:
“We [the SFO] are not in the business of cosy deals, short-cuts or easy targets. We have the stamina and resources to take on the most demanding cases as a snap-shot of our publically known case-load demonstrates”
As the title of his speech would suggest, he also spoke about co-operation and identified DPAs as alternatives to prosecution. Attitudes towards DPAs seem to have changed and according to Morgan, the SFO is no longer: “in the world of having to talk up the DPAs like some sort of salesmen; corporates want them and some will get them.”
Morgan took the opportunity to confirm that:
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the SFO has now issued the very first invitation letters, giving corporates the opportunity to enter into DPA negotiations; and
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to outline the benefits of the DPA regime for offenders.
At this early stage, the SFO have not given away the identity of the organisations currently involved in negotiations, but spoke more generally about the DPA regime. DPAs provide structure for those wanting to resolve their criminal liability to do so quickly and with a degree of control and certainty largely absent from traditional prosecution. However, a DPA is not a “cosy deal”. Criminal proceedings will be commenced and then suspended provided that the corporation complies with the terms of the agreement. The terms of the agreement will be tough and can include fines, orders to pay compensation and other remedial measures.
“Genuine Co-operation”
The SFO has caveated its request for co-operation by repeatedly stressing that it does not want companies to carry out extensive internal investigations before self-reporting which in effect “trample over the crime scene” and potentially compromise evidence.
The SFO is looking for “genuine cooperation” from corporate bodies. The SFO wants Companies to self-report. DPAs are supposed to encourage self-reporting as the deal offered will usually be preferable to being prosecuted and obtaining a criminal record. Genuine self–reporting is a factor that will be considered by the SFO when making the decision whether to prosecute an offender, but it is only one factor and there is no guarantee that the SFO will offer a DPA following a self –report. Companies need to be aware that by informing the SFO in detail of their wrongdoing and providing evidence, they run the risk of that evidence being used against them in a prosecution if they are not offered a DPA as they had hoped.
Also, even if a DPA is agreed, companies will have to consider the true extent of the benefits; a fine can be imposed as a condition of the DPA and the agreement is a transparent, public document which will inevitably lead to bad publicity which could be very damaging, perhaps as damaging (from a reputational perspective) as a traditional prosecution.
Although it is not yet known who the recipients of the first invitation letters are, the fact that the SFO has now started the ball rolling indicates that that the first DPAs are on the horizon. Violation of Section 7 of Bribery Act, failure to prevent bribery, is thought to be an offence to which DPAs could be well suited, however we won’t really know how the SFO will use DPAs until the first UK agreement is finalised. Following Morgan’s comments, we shouldn’t have long to wait.
