Author: Nicola Sharp
28 August 2013
3 min read
When the Crime and Courts Act received Royal Assent, it meant that deferred prosecution agreements (DPA’s) became part of the legal system. Here, we consider the implications of DPA’s for those under investigation.
The arrival of DPA’s came as no big surprise. But it did mean large changes in how some of the major investigating authorities deal with those they believe have behaved outside of the law regarding corporate crime.
The SFO had made no secret of the fact that it often finds it hard to secure convictions in some cases. It even has difficulty sometimes in obtaining enough evidence for a prosecution. This has ruled out the chances of a conviction on many occasions. But it has also made it extremely hard to force companies the SFO suspects of wrongdoing to change the way they function to make sure any illegal behaviour is not repeated. For this reason, DPA’s are seen by UK authorities as a major step forward.
A DPA involves the authorities coming to an arrangement with a company that is suspected of wrongdoing. Under a DPA, a company can voluntarily admit wrongdoing and give an undertaking to put things right. In return for such an undertaking, the SFO or other investigating authority defers any criminal prosecution on condition that the company makes certain agreed changes to put right the wrongs that have been identified. It is not a formal let-off for the company as it has to put everything right otherwise it could still face prosecution. As an example, prosecution of a company could be deferred for an agreed amount of years while the company pays a fine, removes staff known to be guilty of wrongdoing, moves out of the country or sector where it acted illegally, compensates those who suffered from its actions or agrees to be monitored as it introduces anti-corruption measures. If the company keeps its side of the bargain, the prosecution is never brought at the end of the deferral period. But if the company fails to meet its terms under the DPA, the prosecution will go ahead.
Any DPA will be made in open court, with details of the company’s wrongdoing and the sanctions against it made clear. It is the clearest indicator that companies cannot view them as a get out of jail free card. Yes, the immediate prospect of prosecution is removed. But companies have to work hard to get their house in order if they are to avoid prosecution at the end of the deferral period. And companies cannot continue acting inappropriately in the belief that they will be able to escape prosecution by entering into a DPA. It is worth mentioning that the decision on whether a DPA is to be offered instead of bringing an immediate prosecution will not be the company’s to make.
It is vitally important, therefore, that companies see DPA’s as a reminder of the need to make sure they are legally compliant — not an excuse to turn a blind eye to illegal activity being carried out in its name. In the US, DPA’s are viewed as a success for helping the US Department of Justice tackle bad practice and illegal behaviour in many companies. Companies in the UK can, of course, deny all wrongdoing and take their chances in a trial; if an investigation ever goes that far. But companies would be wise to view DPA’s as something that allows the authorities to function more effectively.
DPA’s may not lead to many more prosecutions. But they can be seen as the incentive for the authorities to pursue investigations that they may previously have dropped due to the slender prospect of a prosecution. A DPA gives the authorities another way of approaching corporate crime. It can place the onus on a company to clean up its act without having to obtain a conviction. Companies should be viewing DPA’s as a firm but fair reminder to sort their affairs out. A DPA does not mean a prosecution will follow but it is still one extra route that the authorities have at their disposal to try and obtain one.
DPA’s give both sides a chance to put their case and find a mutually acceptable solution. Critics may claim the DPA penalises a company without ever producing enough evidence for a conviction. Yet no DPA will be entered into unless both the authorities and the company accept and acknowledge that there has been wrongdoing. Similarly, it would be wrong to say that DPA’s effectively let the company off. In agreeing to enter a DPA, a company has to admit any criminal behaviour. This can still mean that individuals guilty of criminality can be prosecuted.
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.