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THE PREFERRED OPTION The Serious Fraud Office (SFO) has announced its second deferred prosecution agreement (DPA). Aziz Rahman considers how they could affect business and what you need to know about them.

4 August 2016

The SFO has revealed some details of its second DPA. While the announcement does not give us all the information, it certainly serves as an indicator of the value of knowing what is wrong in your company and how to proceed.

The SFO has revealed some details of its second DPA. While the announcement does not give us all the information, it certainly serves as an indicator of the value of knowing what is wrong in your company and how to proceed.

We have not been told the name of the company due to ongoing legal proceedings. This does seem to contradict the argument that DPA’s lead to greater transparency, especially as many other trials have gone ahead without secrecy regarding any previous, related court cases. But the SFO has at least stated that the DPA was approved by Lord Justice Leveson at Southwark Crown Court.

The company concerned was facing allegations of conspiracy to corrupt, conspiracy to bribe and failure to prevent bribery regarding its contracts to supply products abroad. As a result of the DPA, the company will pay financial orders of £6.5M, provide a report on all its transactions involving third party intermediaries and complete the introduction of anti-bribery and corruption controls.

SFO Director David Green hailed this DPA as a case of “exemplary cooperation’’ that served the interests of justice while allowing the company to avoid being forced into insolvency because of wrongdoing.

Wrongdoing

So what can a DPA do for a company that becomes aware of wrongdoing being carried out in its name?

Under the terms of a DPA, a company has to admit the criminal behaviour and agree to work under certain conditions that the SFO decides must be imposed. If the company does this, any criminal prosecution against it is deferred. The conditions that the company has to abide by can include altering its working practices, making staff changes, paying fines or introducing measures to prevent any corruption in the future. If the company continues to meet these conditions for a set length of time, it avoids prosecution. If it does not meet them, it is prosecuted.

For a company found to have acted illegally, the DPA avoids what could be a very damaging prosecution and trial. For the SFO, a DPA can resolve illegal behaviour without the effort and expense of an investigation, prosecution and trial. It is worth noting that the company that is the subject of this latest DPA had employed a law firm to carry out an internal investigation before then self-reporting to the SFO. The SFO has now praised this approach as “exemplary’’; indicating the value of bringing in experts to look at your affairs.

Having been introduced to the UK in 2014, the DPA has yet to become as popular with the authorities here as they are in the United States. Whether they become as commonplace here as they have in the US remains to be seen. Ultimately, that is a matter for the SFO to decide.

But whether or not they become more common in the UK, the key issue is what do they mean for someone who is under investigation for business crime? What must you consider when deciding whether to enter into one? And at what stage do you need to seek legal advice?

Incentive

It is important to remember that there is no automatic right to a DPA. The SFO has already made it clear that DPA’s will not be dished out left, right and centre to anyone who wants one. They may be an incentive for companies to self-report any wrongdoing – as with this latest DPA - but this does not mean they are a “Get Out of Jail’’ card for anyone and everyone. From the point of view of a company that believes it has acted illegally, it would be wrong to simply assume that a DPA is the best or only available option.

When deciding whether to grant a DPA, the SFO will be looking at whether it is a more viable option than a prosecution. It will also be looking for the company that has acted illegally to show a clear and obvious determination to put right the wrongs and make every effort possible to stop them happening again. Both these factors are hugely important in the SFO’s decision-making process. They will prompt a very close analysis of the workings of the company under investigation: the scope and duration of the wrongdoing, whether there were attempts to ignore it or cover it up, the number of people who were involved or aware of it and the response once it became known.

Advice

As the SFO does not enter into DPA’s lightly, it is vital that any company hoping for one seeks appropriate legal advice as early as possible. A company can, of course, begin its own enquiries if it suspects wrongdoing. But a legal expert in this field can assess the nature of the wrongdoing and the chances of the SFO regarding the case as suitable for a DPA. As a firm that carries out internal investigations for a wide variety of companies, we cannot emphasise enough the need to have such matters handled by those familiar with the workings of the SFO. That certainly seems to have been proved with this second DPA, where the SFO has praised the company for asking a law firm to investigate before then self-reporting.

Crucially, legal experts can help conduct a thorough internal investigation of the company to determine exactly how much wrongdoing has gone on. This investigation can form the basis of a report to the SFO. The right informed legal advice can influence the timing and extent of the report in order to enhance any chance of a DPA being granted. The lawyer’s findings can also be valuable in devising, introducing and monitoring anti-corruption procedures for the company – procedures which may also help convince the SFO that the company is worthy of a DPA.

To put it bluntly, the SFO will only grant a DPA to a company that has shown itself to be upfront and honest about its wrongdoing and has displayed a genuine desire to put right the wrongs and prevent further ones happening in the future. Legal advice can play a large role in making sure a company ticks the right boxes. But these boxes can only be ticked if the company can show it is now fully aware of what happened and determined to prevent it happening again.


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