We attended a seminar on deferred prosecution agreements at the offices of the leading white collar crime barrister set, QEB Hollis Whiteman.  The guest speakers were Her Majesty’s Solicitor-General, Edward Garnier QC, MP and Amy Jeffress, a Department of Justice attaché from the US Embassy, together with Sean Larkin QC and Edward Brown QC, both of QEB Hollis Whiteman.

We learnt some interesting statistics from the United States, from where the idea of deferred prosecutions and non-prosecution agreements has been taken.  By 2007 there were 39 deferred prosecution agreements and non-prosecution agreements a year and since then they seem to have been averaging at approximately 30 per year.

As a consequence, there has been growth in the total amount of fines.  The combined total for 2010 and 2011 was US$7.6 billion.  The growth is consistent with the Department of Justice’s priorities in relation to Foreign Corrupt Practices Act, healthcare fraud and anti-trust.

According to a report by the US law firm Gibson Dunn and Crutcher, FCPA violations form nearly half (at 45%) of all economic crime prosecuted by the DOJ.

Factors which might influence a prosecutor in deciding whether or not to negotiate a deferred prosecution agreement might include the following factors:

  • The nature and seriousness of the offence – how serious is the criminal conduct?
  • The extent of wrongdoing within the corporation – how evasive is the criminal conduct?
  • Whether there is any history of similar misconduct.

The additional following factors in terms of how the company has behaved will also be considered by the prosecutors:

  • Disclosure of the wrongdoing and cooperation with the prosecuting authority – was the disclosure made in a timely fashion and did it fully disclose the criminal conduct.  Is the company now demonstrating a willingness to cooperate?
  • Is there a pre-existing compliance program, and was it effective?
  • In terms of remedial action – what steps has the company taken to address the issues?

Other considerations might include:

  • Collateral consequences – what is the impact of enforcement on employees, investors and the public in general?
  • In relation to the prosecution of individuals, has this been caused by a poor corporate culture or are they simply bad individuals within an otherwise good corporation?
  • Are civil or administrative enforcement actions adequate to address the problems?

In the US key provisions of a deferred prosecution agreement (or a non-prosecution agreement) would include the following:

  1. The Department of Justice policy is to charge the most serious provable offence.  Criminal information will be filed for the deferred prosecution agreement (but not for a non-prosecution agreement).
  2. A statement of facts will be filed at court.
  3. Penalties will be agreed upon between the prosecution and defence
  4. The agreement will set out steps which the defendant will need to take in order to ensure compliance – this is most usually the imposition of a monitor who will review the compliance program and ensure that remedial steps are put in place.
  5. A period of probation or good behaviour is agreed which tends to range from six months to five years although apparently the average is two years.

In the event of a breach there are various options open as the prosecutor could decide if you require an extension of the term of the deferred prosecution agreement or non-prosecution agreement or to revoke the agreement and to file or pursue criminal charges.

Apparently, revocation has been extremely rare and extensions to the probationary period are much more common.

In conclusion it appears to be the view of the American justice system, and one with which Edward Garnier QC, MP the Solicitor General agrees strongly, that the option of resolving investigations of corporate crime with these type of agreements is very beneficial.

The Solicitor General confirmed that draft legislation will be introduced for deferred prosecution agreements in the next parliament i.e. it will be legislated no later than May 2013.

In addition he confirmed that:

  • There would be no non-prosecution agreements, but only deferred prosecution agreements
  • It would only be for corporates, and not for individuals
  • It is likely that DPAs would be available to the Financial Services Authority and the Office of Fair Trading, as well as the Serious Fraud Office
  • A statutory power for the SFO to negotiate DPAs would be introduced.  It is unclear yet whether this would be a short bill specifically for DPAs or whether the statutory powers would be tacked on to another criminal justice bill.

Anyway the political will within the government is that there should be royal assent to this new legislation no later than Spring 2013 following which there would need to be secondary legislation to ensure that DPAs actually work in practice.  As always, Mr Garnier says, the “devil is in the detail”.

Mr Garnier admitted that the idea had been taken from the United States but the intention was the UK would “leave behind the worst bits” and that “I will learn the lessons of Innospec and of BAE Systems…we don’t want to get kicked around by the court again”.

Mr Garnier pointed out that the UK courts had already made it very clear that prosecutors, specifically the SFO, are not permitted to make so-called “private deals” with the defence and that sentencing is purely within the jurisdiction of the court.  All that prosecutors are permitted to do are to advise the court of the range of possible sentences under the relevant statute.  Mr Garnier concluded therefore that in order for DPAs to work, English judges would need to be involved at a much earlier stage of the criminal proceedings so that they could see what was being discussed and could indicate what they, the judge had in mind.

  “…I am going to need judicial buy-in to deferred prosecution agreements and to ensure that judicial control is preserved for the judiciary…”

Mr Garnier said that he had been speaking to many people over the last few months about the possibility of DPAs and that most of the big law and accountancy firms with whom he had spoken were very positive about the introduction of DPAs.

In order to ensure that DPAs started off smoothly his view is that Lord Justice Thomas, (who had been very critical in recent corruption prosecutions of so-called private deals between the SFO and defendants), ought to be the judge who hears the first deferred prosecution agreement in order so that he could set the rules for the court generally thereafter.  Beyond that, Mr Garnier believes that a small group of specialist judges should deal with serious economic crime so that they developed a particular expertise in this area of criminal enforcement.

In our view, the Solicitor General’s confirmation that DPAs would be introduced into UK law is a very positive step forward in the enforcement of complex international crime.  Although the road to its introduction may be bumpy, it is clear that he is very determined that it should happen and he is working with the judiciary to ensure that it is a success.

There is bound to be a great deal more to blog on on this subject in the coming months and years.