In November 2015 the Serious Fraud Office (SFO) secured the first deferred prosecution agreement (DPA) in R v Standard Bank (for further details please see "First deferred prosecution agreement concluded"). On July 11 2016 the final judgment was delivered in the second DPA case, R v XYZ.
After XYZ was purchased by US company ABC, it became known that corrupt activity had taken place. In 2012 XYZ self-reported through its lawyers. Subsequently, the SFO conducted a prolonged investigation, with which the company cooperated. Notably, the company asserted proper claims to legal professional privilege while providing the SFO with summaries of the accounts given by witnesses.
The key feature of the XYZ DPA is the level of financial penalty imposed. ABC has entered into an agreement to loan XYZ the money required to satisfy the terms of the DPA. It has also returned almost £2,000,000 to XYZ (which is apparently equivalent to the benefits innocently received by ABC, the criminal nature of which it was unaware). Without the support of its parent company, XYZ would risk failing, but the court emphasised that ABC had no obligation to provide such support.
The DPA secured in R v Standard Bank imposed penalties which many observers and professionals believed were unlikely to encourage other companies to press for similar treatment.
Speaking at a conference in June 2016, Sir Brian Leveson argued that companies that are entitled to a DPA following early self-reporting should be entitled to much more than a one-third reduction of their penalty. Despite the fact that Leveson's comments were couched in terms that he was not expressing an opinion on behalf of the judiciary, they carry significant weight. Leveson was the judge who presided over the first two DPA proceedings and is therefore an authoritative voice on the United Kingdom's limited jurisprudence on the development and application of DPAs.
A one-third reduction of a penalty is identical to the discount afforded to a defendant that enters a guilty plea at its first Crown Court hearing. However, significantly lower government investigation and court resources will likely be expended in securing a DPA than in requiring prosecutors to build a case only to plead guilty at the first Crown Court hearing, and it would be reasonable for this to be reflected in the terms of DPAs.
It remains to be seen whether subsequent DPAs and the judges reviewing them will adopt Leveson's proposals and how subsequent DPAs will manage the difficult balance of deterring corruption against incentivising self-reporting and the early detection of criminal conduct.
For further information on this topic please contact Kathleen Harris, Stuart Baker, Michael J Atkinson or James McSweeney at Arnold & Porter LLP by telephone (+44 20 7786 6100) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Arnold & Porter website can be accessed at www.arnoldporter.com.
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