The SFO are currently basking in the praise of judges and lawyers alike after the first UK deferred prosecution agreement (DPA) was handed down, and reports say that the regulator has been inundated with enquiries from lawyers on behalf of anxious clients. While the praise is rightly deserved, the extent to which the judgment of Sir Brian Leveson can indeed be a template for future DPAs should not be overstated.
When DPAs were introduced to UK law in 2013 they were heralded as both a way to make corporations more accountable for wrongdoing, and a way for those same corporations to put their wrongdoing behind them by means of a program of full cooperation and disclosure to the authorities. No doubt this was done with an eye on the billions of dollars in fines successfully collected by US prosecutors, as large multinationals line up to pay fines and escape prosecution for a variety of offences.
However, the recent news that an individual Deutsche Bank broker was granted a DPA by US prosecutors in Manhattan, demonstrates a fundamental difference between how the US usesDPAs in comparison with the UK’s approach. It is true that the Yates Memorandum is currently causing concern to US corporate white collar crime lawyers for its emphasis on making corporates gather evidence to enable the prosecution of individuals; but that only makes it more significant that an individual from a bank can today still be granted a DPA by the US Department of Justice.
In the UK, disquiet at the idea of corporations being able to ‘buy’ their way out of prosecution led to two important differences in the final English law version: first, a DPA must be approved by a Judge, and second, DPAs can only extend to corporations, not individuals. Indeed the guidance notes behind DPAs make it plain that corporations are expected to provide evidence which will allow the prosecution of those individuals that were behind the conduct.
This is a laudable aim, for the idea that individuals can somehow escape prosecution for criminal offences by paying money is generally viewed with disquiet. However, in my opinion, in completely excluding individuals from cover under a DPA, the law’s writers have endowed it with a flaw that means it will rarely be put to full use. In many cases the evidence needs a witness to explain the background and sometimes to explain the meaning of crucial documents. Such witnesses may be deterred from coming forward if they do not themselves have any reassurance that they will not find their words being used against them in a prosecution. After all, the aim of the DPA is to find evidence against individuals.
The facts that underlie the recent DPA judgment set it apart from this on two telling fronts. First, the wrongdoing appears to have been discovered by the new owners of the business on or shortly after their purchase of it. Thus those reporting could fairly claim that the conduct had not occurred on their watch. Second, the facts reported were about as straightforward as one could hope for in a corruption case, leading Leveson J to conclude that the arrangement in question had “many hallmarks of bribery on a large scale and which both could and should have been prevented“. For the answer to why the company was not simply required to plead guilty to an offence, see the first factor above. In other words, the UK’s first DPA is very much a case on its own facts. For surely there will be many more where there is no ‘new broom’ to confidently accept advice to report corporate crime, and where the conduct is more indistinct, and needs a witness – someone who was there – to provide crucial evidence.
It is precisely those slightly more difficult to prove cases that will surely be prime candidates for DPAs. But the importance of witness evidence in those cases should not be underestimated.
Some 20 years ago the US Department of Justice’s Antitrust Division instituted a leniency program whereby the first member of a cartel to report its conduct would be granted immunity from prosecution. That immunity extended, and extends, to employees of the applicant who cooperate. Implicit in that regime is a recognition that (1) the best evidence comes from someone who was there at the scene of the crime, and (2) you cannot get reliable evidence about the conduct (and intentions) of a corporate without speaking to individuals, who must themselves be able to speak freely.
That leniency program has been copied all around the world. In the limited environment of hard-core cartels, it has provoked a rush of disclosures and applications for leniency, if not an overwhelming number of convictions. Other divisions of the Department of Justice and other US Agencies, while not bound by a statutory leniency program, similarly encourage cooperation, and in appropriate cases conduct pragmatic and sensible discussions with attorneys whose clients have elected not to stick their heads in the sand.
Such an approach marks a recognition that the business of obtaining convictions in white collar cases can be challenging and compromises have to be made. Those compromises include occasionally giving reduced sentences or immunities to individuals and corporations in return for evidence against more serious offenders. Like it or not, offenders must believe that the advantages of stopping their behaviour, disclosing their wrongdoing and cooperating outweigh the risks they face if they ‘wait and see’ and take their day in court. In the same way, drawing the line between those who are prosecuted and those who are not is often a messy, imprecise business, which may on occasion be driven as much by pragmatic issues as by theCPS Code for Prosecutors. The same pragmatism should be extended to the conduct of aDPA.
None of this is to say that more UK DPAs will not soon be granted to cooperating companies that wish to put the threat of a particular investigation behind it. But if such an investigation is to truly get to the heart of what went on, and/or is to provide compelling and admissible evidence against individuals, then a more pragmatic and sensible stance needs to be taken when considering the position of witnesses who may themselves not be targets for prosecution, but will not wish to change that for the worse by giving admissible evidence which serves to implicate them – along with others – in the conduct being investigated.