Deferred Prosecution Agreements are a new method of dealing with cases of suspected financial crime by companies and other organisations, introduced by the Crime and Courts Act 2013. Now, the Serious Fraud Office and the Director of Public Prosecutions have published a draft Code of Practice for consultation covering their proposals on the criteria for suitable cases, and the process for putting them into practice.
The sole criterion in the Act for whether a case is suitable for a DPA is that a judge thinks it is ‘in the interests of justice’. (He or she will then go on to decide whether the terms proposed for the particular DPA are ‘fair, reasonable and proportionate’.) The draft Code puts some flesh on the bones by suggesting guidance for when a prosecutor might ‘invite’ an organisation to agree to one.
The first stage is to assess whether there is either a realistic prospect of conviction (the usual evidential test for a prosecutor) or ‘at least a reasonable suspicion’ that the organisation has committed the offence. This arguably sets the bar quite low, but has the advantage of allowing the prosecutor to start this process early on in an investigation without having to wait for compelling evidence to be found.
The second stage is to assess whether the public interest would be properly served by a DPA as opposed to a prosecution. Again, this arguably lowers the threshold at which an organisation would be subject to penalties, insofar as there are cases that currently would not be in the public interest to prosecute, but may be dealt with by means of a DPA under the proposed regime.
The details of what factors the draft Code suggests are relevant in deciding that this test is satisfied are perhaps not surprising, including a ‘genuinely proactive approach’ by the organisation, and an ‘effective corporate compliance programme’. A self-report will help, though in itself it will not be determinative. Of course, where the allegation is of the new corporate offence in the Bribery Act of failing to prevent bribery (section 7), the effectiveness or otherwise of the organisation’s compliance programme may itself be at issue, in which case it is hard to see how that criterion could be met.
The proposed process starts with a formal letter from the SFO and moves through ‘transparent’ negotiations, subject to undertakings about confidentiality and caveats about subsequent use of the information provided. The parties will draw up a ‘statement of facts’ and a set of proposed terms to present to the court.
The draft Code says little about non-standard terms that could be proposed other than the all-important financial settlement (including penalty, costs, compensation, and disgorgement of profits) and the imposition of independent monitors to oversee the organisation’s internal controls. It makes the slightly oblique point that as an organisation without effective compliance is unlikely to be a candidate for a DPA, the use of monitors should be ‘approached with care’. Again, it is perhaps hard to see how this would work in practice.
The Act says the level of financial penalty applied should be ‘broadly comparable’ to the fine a court would impose after a guilty plea. The draft Code acknowledges that the extent of discretion here is broad, and notably its publication was accompanied by a consultation from the Sentencing Council that makes a greater attempt than ever before at guidelines for relevant offences. Nevertheless, the proposal for the penalty (together with but perhaps more than the other terms and the statement of facts) will likely be the subject of great scrutiny by the judge at the envisaged court hearings.
The draft Code goes on to consider the proposed process for dealing with alleged breaches of the DPA, varying it, and the formal discontinuance of proceedings (removing the threat of being prosecuted) at the expiry of its term. One important point is that if the DPA is breached then the organisation of course may be prosecuted for the original offence, but only if the full evidential and public interest tests are satisfied. The ‘statement of facts’ will be admissible in evidence, which will be particularly relevant if the organisation has admitted the offence (though it is not required to do so).
Inevitably perhaps, the overall impression given by the draft Code is that a great deal of discretion is being reserved for the prosecutor and the courts in deciding when to use this new tool and how it will work in practice. Much will depend on the attitude of the judges, with respect to which the only safe prediction is that they will not want their agreement to any deal, either in principle or in detailed terms, to be taken for granted.
The lack of ideas in the draft Code about non-financial terms and the apparent lack of enthusiasm for monitoring, meanwhile, hint that the prosecutors’ main interest is in hitting the organisations’ bottom line with financial penalties that, it is anticipated, will be more significant than those imposed in corporate prosecutions to date. This may or may not suit the organisations in question, whose greatest interest in most criminal investigations will be achieving business certainty promptly in a system traditionally characterised as arbitrary, costly, and slow. The decisions it makes on the method and parameters of any internal investigation, whether and when to self-report, the precise detail of the engagement with the investigators, and the content of the ‘statement of facts’, will be of paramount importance. The reality perhaps is that if and when the ‘right’ case arises, it will be the organisation itself that makes the running in proposing a settlement that is both credible and proportionate, and in effect, enables the prosecutors and courts to achieve a just result.
The draft Code is available on the SFO website. The closing date for responses is 20 September 2013, with the system expected to go live in February 2014. It will be retrospective, in that DPAs will be a means of disposal available in cases already under investigation at that time.