Bark & Co Solicitors London: Deferred Prosecution Agreements // Current TV

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The director of the Serious Fraud Office (SFO) and the Solicitor General, Edward Garnier QC, have recently made no secret of the fact that they consider the criminal justice system to be incapable of dealing with corporate prosecutions in a way that refects commercial realities. The blunt impact of a prosecution of a company has the impact of damaging innocent parties including employees, shareholders and creditors. Garnier cited the cautionary example of the ill-effects of prosecution caused to Arthur Andersen, eventually acquitted on charges of obstruction of justice by the US Supreme Court, many years after the allegations had destroyed the company. US prosecutors have a tool at their disposal, the deferred prosecution agreement (DPA), which is being touted as a viable alternative to the present options of either prosecution or civil recovery. Much of the impetus for the reform has been caused by the difficulties faced by the SFO when they sought to prosecute Innospec. The SFO effectively had already agreed with the company, pre-sentencing, the nature of the sentence in return for a guilty plea. This was criticized by Thomas LJ who reminded the SFO that it is for the Judge to determine sentence at his discretion and especially that any plea must be rigorously scrutinized in open court. The US Approach In the US, DPAs are considered a hugely important weapon in the armoury of a highly successful prosecutor the Department of Justice, which entered into nine DPAs in 2009. The DPA does pretty much what it says on the tin, deferring criminal prosecution pending certain terms and conditions being agreed (and adhered to) and fled in a formal indictment at court. Typical conditions are that prosecution is deferred for two - three years with the payment of a fine commensurate with the Federal Sentencing Guidelines, disgorgement of profits, a clear out of implicated directors, a possible pull-out from the market in which the wrongdoing is admitted, and the possible instruction of a court appointed monitor where the corporate does not have proper anti-corruption procedures presently in place. The appointment of monitors has been particularly contentious in the US where there have been allegations of a lack of transparency in their appointment, cronyism and high cost. The costs charged by monitors is particularly eye-watering to UK onlookers. Innospec were charged $50m for the corporate monitor (described by the sentencing Judge as an outrage), agreed as part of their DPA in the US.

TRANSCRIPT

  • 1. Bark & CoSolicitorsLondon:DeferredProsecutionAgreements- Bark & Co Solicitors
  • 2. The director of the SeriousFraud Office (SFO) and theSolicitor General, EdwardGarnier QC
  • 3. The director of the Serious Fraud Office (SFO) andthe Solicitor General, Edward Garnier QC, haverecently made no secret of the fact that theyconsider the criminal justice system to be incapableof dealing with corporate prosecutions in a waythat refects commercial realities. The blunt impactof a prosecution of a company has the impact ofdamaging innocent parties includingemployees, shareholders and creditors. Garniercited the cautionary example of the ill-effects ofprosecution caused to Arthur Andersen, eventuallyacquitted on charges of obstruction of justice bythe US Supreme Court, many years after theallegations had destroyed the company.
  • 4. US prosecutors have a tool at their disposal, thedeferred prosecution agreement (DPA), whichis being touted as a viable alternative to thepresent options of either prosecution or civilrecovery. Much of the impetusfor the reform has been caused by thedifficulties faced by the SFO when they soughtto prosecute Innospec. The SFO effectively hadalready agreed with the company, pre-sentencing, the nature of the sentence in returnfor a guilty plea. This was criticized by Thomas LJwho reminded the SFO that it is for the Judge todetermine sentence at his discretion andespecially that any plea must be rigorouslyscrutinized in open court.
  • 5. The US ApproachIn the US, DPAs are considered a hugely important weapon inthe armoury of a highly successful prosecutor the Departmentof Justice, which entered into nine DPAs in 2009. The DPA doespretty much what it says on the tin, deferring criminalprosecution pending certain terms and conditions being agreed(and adhered to) and fled in a formal indictment at court.Typical conditions are that prosecution is deferred for two - threeyears with the payment of a fine commensurate with theFederalSentencing Guidelines, disgorgement of profits, a clear out ofimplicated directors, a possible pull-out from the market in whichthe wrongdoing is admitted, and the possible instruction of acourt appointed monitor where the corporate does not haveproper anti-corruption procedures presently in place.
  • 6. The appointment of monitors has beenparticularly contentious in the US where therehave been allegations of a lack of transparencyin their appointment, cronyism and high cost.The costs charged by monitors is particularlyeye-watering to UK onlookers. Innospec werecharged $50m for the corporate monitor(described by the sentencing Judge as anoutrage), agreed as part of their DPA in theUS.
  • 7. Are DPAs Right for the UK?As it stands in the UK, the SFO has found it difficult, timeconsuming and costly to prosecute corporates in the UKfor bribery and related offences as well as occasionallystymied by political interference. It is unlikely to find it anyeasier under the Bribery Act. It should also be noted thatthe SFO has been given no new money to prosecuteoffences committed under the Bribery Act. DPAs wouldtherefore be a godsend. Corporates for their part mayaccept their criminality more readily should they be giventhe option of accepting a DPA as opposed to beingprosecuted with all the economic damage that wouldentail. Explicit in the agreement of the DPA is that thecompany is properly prosecutable (ie, the identificationprinciple is met) and the course of conduct meets thecriminal test for prosecution ie, this isnt a civil recoveryunder Pt.5 of POCA.
  • 8. Thomas LJ again commented in hisInnospec judgment that mattersinvolving corrupt payments will rarely beappropriate to the dealt with by a civilrecovery order. One wonders whetherthe judiciary will be resistant to DPAswhich explicitly admit criminality butwhere penalty may be consideredtantamount to a civil recovery order.What Will DPAs Look Like?
  • 9. The mechanics of DPAs are a long wayfrom being ironed out. The DPAs musthave the publics confidence and, in thewords of Garnier be policed andcontrolled by the judiciary. In the eventthat an offence is eitherdetected, perhaps through awhistleblower, or self-reported and theSFO considers aDPA may be an appropriateresolution, the Judge will becomeinvolved early, and before charges arebrought to scrutinize any propsedagreement.
  • 10. This will be problematic. However, Judges in thecriminal justice system are already accustomedto providing early input in sentencing, throughthe procedure of Goodyear indications. In suchcases where an individual is consideringpleading to agreed facts he may request a-binding indication on sentence in open court,with reporting restrictions, from the trial Judge.Once given an indication, the defendant is notcommitted to pleading. It will be the type andseverity of the sentence that will be the mostcontentious aspect of DPAs and the most at riskto accusations of a lack of transparency.
  • 11. In addition, it is essential for the corporateslegal team to be able to advise with a degreeof reasonable certainty what the likelysentence will be. The US has a system by whichsentence can more or less be worked out on acalculator that is an anathema to Judgeshere. In light of the Grazia Report, a number ofguidelines were introduced in this area(eg, Attorney Generals Guidelines onPleas, and the SFO Guidelines on SelfReporting), which are instructive for advisersand clients.
  • 12. In the absence of settled Court of Appeal caselaw on corporate sentencing, properly debatedand approved sentencing guidelines (related tothe guidelines already issued by the sentencingcouncil for theft and statutory fraud offences)setting out procedure and factors affectingsentence would be helpful in answering criticismof a lack of transparency as well as assistingparties to the DPA.Finally, it will be important thatit is made explicit that while DPAs may prove analternative to prosecution for corporates, whereindividual criminality is committed (as is necessaryfor the corporate to meet the identificationprinciple), DPAs will not provide immunity to thosedirectors deserving of prosecution.
  • 13. We consider that as with most USdevelopments in business crime, DPAs arelikely to prove popular over here with theSFO. The principal question exercisinglegislators will be how to ensure that DPAshave the publics confidence that theyare fair and just while ensuring thatJudges concerns will be met and thesacrosant principles underpiningsentencing will not be underminded.
  • 14. Is using the F word to an officer of the law nowacceptable?22 November 2011 No CommentBy Sarah LewisOur changing attitude towards bad languagewas highlighted last week in Harvey v DPP, AC,17 November 2011 which confirmed that, whilstit is an offence to use threatening, abusive orinsulting words and behaviour, swearing atpolice officers is not a crime because of cershear foul language all too frequently to beharassed, alarmed or distressed by it.
  • 15. This is decision overturned the public orderconviction of Denzel Harvey, a young suspectwho repeatedly said the F word while beingsearched for drugs.Harvey was standing with agroup of people outside a block of flats whenhe was approached by police officers who toldhim that they wished to search him. Hisresponse to the officers was, F this man. Iaint been smoking nothing. He was warnedabout his behaviour and threatened with anarrest under s 5 Public Order Act 1996.
  • 16. When the search revealed nothing, hecontinued, Told you, you wouldnt find f all.He was further warned and then, when asked ifhe had a middle name, he replied, No, Ivealready fing told you so. Harvey was arrestedfor a s 5 offence, and subsequently convictedbefore the Magistrates Court who held thatthere were people around who dont need tohear frightening and abusive words issuing fromyoung men despite there being no evidencethat anyone, officer or otherwise, was in factcaused harassment, alarm or distress.

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